Egypt takes economic action to counter Coronavirus effects 1
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Denys Bédarride
Friday 15 May 2020 Last update on Friday, May 15, 2020 At 3:09 PM

Egypt’s request for a loan facility under the IMF’s Rapid Financing Instrument (RFI) will be examined next Monday, while Moody’s published its forecasts for the country’s economy.

IMF: the request for rapid financing to Egypt to be assessed

The Executive Board of the International Monetary Fund (IMF) will meet on May 11th to consider Egypt’s request for a loan facility under the Organization’s Rapid Financing Instrument (RFI). Meanwhile, Moody’s expects Egypt’s economy to grow by 4.4 percent by end of current fiscal year.

Up to $2.78 billion through the RFI and $4 billion a year under the SBA

In April, Cairo requested financial support from the International Monetary Fund to help it deal with the Coronavirus outbreak and is seeking a Stand-By Arrangement (SBA) loan as well as emergency financing through the Rapid Financing Instrument (RFI).

Egypt can potentially borrow up to $2.78 billion through the RFI and about $4 billion a year under the SBA, analysts estimate. The two programmes are designed to assist countries with urgent or potential balance of payments problems.

Prime Minister Mostafa Madbouly said his country was seeking help because the Coronavirus crisis was putting pressure on tourism and other important sources of foreign currency.

Tourism, which accounts for about 5 % of gross domestic product, has been virtually blocked since the government closed the airports back in March. The crisis is also threatening money transfers from Egyptians working abroad, which account for 10 % of GDP, as well as natural gas exports and revenue from the Suez Canal.

Egypt will relax some Coronavirus lockdown rules for Ramadan

The North African country, which is home to 100 million people, has taken strict measures to contain the spread of the virus, including the closure of schools, universities, mosques and churches as well as the suspension of flights.

Egypt has also taken steps to reduce the impact of the Coronavirus on the economy. The country decided to reduce the interest rate by 3 % to allow loans to informal workers and to promote wage payments through an emergency fund.

The Central Bank of Egypt (CBE) says it injected 20 billion Egyptian pounds ($ 1.27 billion) to support the stock market.

Last week, the government announced that night curfew hours will be reduced during the Muslim holy month of Ramadan and the lockdown will last from 9 p.m., instead of 8 a.m., until 6 a.m. According to a report published by the country’s health and safety authorities, Egypt should not reach its peak before the third week of May, which will coincide with the end of Ramadan.

Therefore, the government has agreed to continue with the closure of parks and beaches throughout the holy month, which began on April 23th, and to renew the distance and movement restriction measures imposed in late March. President al-Sisi said that the losses resulting from total economic closure could be worse than those resulting from COVID-19 and is preparing to “allow a gradual return to normality”.

Moody’s expects the Egyptian economy to grow 4.4 % despite the Coronavirus outbreak

The International Financial Rating Agency Moody’s expects the Egyptian economy to grow by 4.4% by the end of fiscal year 2019/2020, which will end next June, according to a report published Tuesday. Moody’s stresses that the economic reform measures undertaken by the Egyptian government, which have led to the achievement of high growth rates, are the main reason for the strength of the Egyptian economy despite the significant impact of the Coronavirus outbreak.

The report highlights Egypt’s average growth of 5.4% over the past two years and the reform programmes jointly implemented by the government and the Central Bank of Egypt that have contributed to the recovery of the economy.

This economic performance helped bring the unemployment rate down to 8 % in the last quarter of 2019, according to the report, which expects an inflation rate of 8.5% by the end of June.

Moody’s praised the preventive measures taken by the Egyptian government to stem the spread of the Coronavirus and its economic measures to support companies and individuals affected by the pandemic, including a $6.35 billion announced by President Abdel Fattah El-Sissi to alleviate the impact of the crisis and support the economy.

Moody’s sheds light on the decline in public debt to 84.2 % of GDP by the end of 2019 compared to 103 % at the end of 2017, while expecting this decline to continue despite the economic repercussions of the spread of Covid-19.