After several series of reforms conducted under the supervision of the IMF, Egypt will begin a new program of 3 billion USD which aims to put in place others over 46 months, in order to support macroeconomic stability.
Egypt will benefit from new financing of USD 3 billion under a new aid program granted by the IMF. The financing is part of an extended credit mechanism (MEDC) whose implementation will be spread over 46 months. It aims to preserve macroeconomic stability, restore foreign exchange reserves and pave the way for inclusive and private sector-led growth. The announcement was made by the institution in a statement released on December 16, 2022.
To do this, the program will aim to facilitate a sustainable transition to a flexible exchange rate regime, the adoption of a monetary policy to gradually reduce inflation, and fiscal consolidation to put public debt on a downward curve. The reforms will also strengthen social safety nets to protect the vulnerable, while improving governance and transparency.
This financing comes as Egypt, which is barely emerging from the Covid-19 crisis, wants to continue its economic recovery despite an uncertain international context marked in particular by the crisis in Ukraine. In addition to supporting the balance of payments and strengthening foreign exchange reserves, the authorities seek to preserve the purchasing power of the population eroded by inflationary pressures, while maintaining ambitions in the fight against climate change.
Thus, Cairo has started negotiations to obtain an additional USD 1 billion under the Resilience and Sustainability Facility (RDF) set up this year by the IMF.
In addition, “over the life of the program, the MEDC is expected to catalyze additional financing of approximately USD 14 billion from Egypt’s international and regional partners, including new financing from Gulf Cooperation Council countries. and other partners through the ongoing sale of public assets, as well as traditional forms of financing from multilateral and bilateral creditors.
It should be recalled that Egypt has already benefited in recent years from several IMF financing to support its economic reforms. According to Kristalina Georgieva, the institution’s managing director, the Egyptian authorities’ strong ownership of the reforms recommended by the IMF and “their track record under previous programs supported by the Fund, as well as their political support for the constitute important risk mitigating factors for the achievement of the objectives of the program supported by the Fund”.
It should be noted that the approval of the new program entails the immediate disbursement of a first tranche of financing, in the order of 347 million USD.