IMF Reaches Initial Agreement With Egypt for $2 Billion Tranche

CAIRO (Capital Markets in Africa) – The International Monetary Fund reached a staff-level agreement with Egypt to unlock a $2 billion loan installment, and said economic reforms in the Arab world’s most populous nation are starting to pay off.

Egypt and the Washington-based lender signed a 3-year, $12 billion agreement a year ago, of which $4 billion has already been disbursed. The next $2 billion installment is subject to approval from the IMF’s executive board, and Egyptian authorities have said they expect the money by the end of this year or the beginning of 2018.

“Egypt’s economy continues to perform strongly,” Subir Lall, head of the IMF’s mission to Egypt, said in a statement following the conclusion of a two-week review of the country’s economic program. “Reforms that have already been implemented are beginning to pay off in terms of macroeconomic stabilization and the return of confidence.”

The Egyptian pound lost nearly 50 percent of its value against the dollar after it was floated last November, helping inflation surge above 30 percent in the past 12 months — its highest level in decades. The government has also cut fuel subsidies and introduced new taxes, further squeezing Egypt’s 96-million population, half of which lives below or near the poverty line.

Headline inflation “appears to have peaked in July” and is declining thanks to the central bank’s “prudent monetary policy,” Lall said in the statement. “While the reform process has required sacrifices in the short term, seizing the current moment of opportunity to transform Egypt into a dynamic, modern, and fast-growing economy will improve the living standards and increase prosperity for all Egyptians.”

Source: Bloomberg Business News