The International Monetary Fund (IMF) and Egyptian authorities have reached staff-level agreement on a set of comprehensive policies and reforms.
The new agreement will also see the IMF increase loan facility to Egypt from $3 billion to around $8 billion. This $5 billion facility is subject to approval by the IMF Executive Board.
“The comprehensive policy package seeks to preserve debt sustainability, restore price stability, and reinstate a well-functioning exchange rate system, while continuing to push forward deep structural reforms to promote private sector-led growth and job creation,” the IMF said in a statement.
The latest agreement is an expansion of the $3 billion, 46-month extended fund facility that the IMF struck with Egypt in December 2022. A key plank of this deal was a shift to a more flexible exchange rate system.
Earlier on Wednesday, Egypt’s central bank (CBE) announced that it has raised interest rates by 600 basis points and will allow the country’s currency to trade freely. This decision is aimed at restoring economic stability and attracting investment from Gulf countries.
Six reforms
The IMF also outlined six pillars for economic reforms that Egypt must implement.
These include a flexible exchange rate regime; additional monetary policy tightening to reduce inflation and reverse the recent dollarization trend; fiscal consolidation to preserve debt sustainability; a new framework to slow down infrastructure spending; providing adequate levels of social spending to protect vulnerable groups; and the implementation of the state ownership policy and reforms to level the playing field for private sector growth.
These policies will help preserve macroeconomic stability and restore confidence. Moreover, they will allow Egypt to manage the challenges associated with recent external shocks.
“Egypt’s international and regional partners will play a critical role in facilitating the implementation of the authorities’ policies and reforms,” the IMF urged.
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