Egypt currency devaluation: IMF okays $8 Billion bailout package
The International Monetary Fund (IMF) has agreed to Egypt‘s request for support amid its most severe economic crisis in decades. Originally set at $3 billion, the IMF has agreed to boost Egypt’s bailout loan to approximately $8 billion.
Egypt Prime Minister, Moustafa Madbouly, announced on Wednesday, following negotiations with the IMF and the decision of the Central Bank of Egypt to allow the currency to float freely.
This move, according to the CBE, was aimed at regaining the confidence of foreign investors, however, the pound lost more than 60 per cent of its value against the dollar within hours.
In response, Egypt’s central bank monetary policy committee (MPC) raised benchmark interest rates by 600 basis points to 27.25 per cent and increased the overnight lending rate to 28.25 per cent, intended to expedite the monetary tightening process and curb inflation.
Egypt has for months negotiated with the IMF a tightly managed exchange rate and to increase the initial $3 billion bailout loan agreed upon in 2022 while it grapples with a severe foreign currency shortage, leading to soaring prices of essential goods, escalating debt, and a significant devaluation of the currency.
However, Prime Minister Madbouly expressed optimism about the new agreement, noting that it would enable Egypt to access additional loans from other financial institutions such as the World Bank, to promote environmental sustainability.
The agreement, also includes measures to curtail infrastructure spending, particularly on projects operating outside regular budget oversight.
The IMF emphasized that the agreement, subject to approval by the IMF executive board, reflects consensus on policies necessary to complete the first and second reviews under the program, unlocking much-needed funding to address Egypt’s economic challenges.
