The International Monetary Fund said in a statement that its executive board had approved a $3 billion financial support package for Egypt for 46 months, adding that it would stimulate about $14 billion in additional funding.
The package includes a flexible exchange rate system and strengthening social safety nets to protect vulnerable populations, the statement said.
The approval of the package at the expert level was announced on October 27.
The statement added that the agreement provides for an immediate payment of $347 million to Egypt to support Egypt’s balance of payments and its overall budget.
The statement said the agreement is expected to stimulate about $14 billion in additional funding, including investments, from Egypt’s international and regional partners.
The agreement includes a program of wide-ranging structural reforms aimed at “reducing the influence of the state and creating a level playing field between the public and private sectors.” It also provides for early monetary tightening and fiscal consolidation.
Ali Metwalli, an economic analyst for the Middle East and North Africa at Infospectrum, said in a previous interview with Al-Arabiya that the first tranche of the IMF loan will help Egypt return to international debt markets, as the loan will give foreign investors confidence in Egyptian debt instruments.
Regarding the fact that the Central Bank of Egypt did not hold an extraordinary meeting before the decision of the Monetary Board, he explained that the Central Bank is trying to find a solution regarding the flexibility of the exchange rate, which is associated with a loan, but if the Central Bank floats the pound again, its fall could continue as at least until the middle of next year due to the continued rise in interest rates in Egypt, America, which strengthens the strength of the dollar.
He added that the Central Bank of Egypt is trying to find a solution that will allow it to get a loan without delaying the slowdown in high inflation and lower incomes of the population.
He said that spending from foreign exchange reserves is not a solution because they are limited and it is not possible to keep spending from them to save the currency.
He expected the Central Bank to raise the interest rate at the next meeting by 1-2%, which indicates the expectation of another increase next February.
He added that the increase could be accompanied by a decision to lower the exchange rate to levels close to the black market rate.
Metwally stressed that if this happens, it could backfire because the current pressure on the foreign exchange market is largely the result of furious speculation driven by fears of a dollar deficit in light of global conditions, rather than the catastrophic crisis that Egypt is experiencing. is experiencing, because it does not suffer from a crisis of obligations. When paying off its external debts, nothing threatens foreign exchange reserves.
Egypt’s central bank anticipated an agreement with the fund on a package of measures, chief among which was to raise interest rates by 200 basis points and make the pound more flexible to supply and demand mechanisms.
