2024-03-30T07:08:36+00:00
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/ The International Monetary Fund confirmed on Saturday that Egypt had obtained the approval of the Fund’s Executive Board to increase the extended financial support program to eight billion dollars, which would allow the immediate withdrawal of about 820 million dollars.
According to a statement, the Fund agreed to expand the scope of the agreement after Egypt’s faltering economy was further damaged by the war in the Gaza Strip, which slowed the growth of tourism and prompted the Houthis in Yemen to launch attacks in the Red Sea, which led to a halving of Suez Canal revenues. Tourism and shipping are the main sources of foreign exchange in Egypt.
The Fund stated that “the difficult external environment created by Russia’s war in Ukraine was subsequently exacerbated by the war in Gaza and Israel, as well as tensions in the Red Sea,” according to what was reported by Reuters.
The agreement expands an extended fund facility by $3 billion for a period of 46 months concluded in December 2022, which was suspended after Egypt did not adhere to its pledges to liberalize the currency exchange rate, accelerate the sale of state assets, and implement other reforms.
The extension of the agreement was first announced in March, when the Central Bank of Egypt raised interest rates by six percentage points and allowed the value of the Egyptian pound to be devalued against the dollar.
The Fund explained that a strong plan is being implemented to achieve economic stability to correct errors in policies, “with a focus on liberalizing the foreign exchange system, tightening fiscal and monetary policy, reducing government investment, and providing more space for the private sector.”
This will include continuing to reduce subsidies, which consume a large portion of government expenditures. Last week, Egypt raised the prices of a wide range of fuel products.
“It remains necessary to replace untargeted fuel subsidies with targeted social spending as part of a sustainable fuel price adjustment package,” the Fund said in its statement.
The Fund stated that Egypt has developed a new framework for monitoring and controlling public investment that will help manage the increase in demand, but the state and the army will have to withdraw from economic activity.
He added: “Integrating transparent off-budget investment into macroeconomic policy decision-making will be critical.”
Egypt is under pressure to cut spending on large public projects, especially the $60 billion new capital project, which it is building in the desert east of Cairo.
Last month, Egypt agreed to sell the rights to develop prime land in Ras El Hekma on the Mediterranean coast to the UAE for $24 billion. During this month, Egypt also received financing pledges of $6 billion from the World Bank Group and $8.1 billion from the European Union. .
Regarding the “Ras Al-Hikma” deal that Egypt recently concluded with the UAE, which amounted to 35 billion US dollars, the Fund believed that it “will reduce pressures on the balance of payments in the near term, and if used wisely, it will help Egypt rebuild safety margins to deal with future shocks.” “.
The International Monetary Fund expected that Egypt’s growth rate would slow to 3% in the fiscal year ending in June 2024 from 3.8% in 2022-2023, before recovering to about 4.5% in 2024-2025.