Egypt reaches agreement with IMF on next $2 bn loan payment

Egypt reaches agreement with IMF on next $2 bn loan payment
The International Monetary Fund said it has reached an agreement with Egypt on the release of the next $2 billion loan instalment.
3 min read
01 November, 2018
The loan program for Egypt was signed in November 2016 [Getty]

Egypt reached an agreement with the International Monetary Fund on release of the next $2 billion loan instalment, the fifth under the country's three-year aid program, the IMF announced on Wednesday.

The agreement with the IMF staff is subject to approval by the executive board of the Washington-based crisis lender.

The loan program for Egypt was signed in November 2016, and with this payment Cairo will have received $10 billion of the total.

"The Egyptian economy has continued to perform well, despite less favourable global conditions, supported by the authorities' strong implementation of the reform program," IMF mission chief Subir Lall said in a statement.

In addition, he said the central bank's "prudent monetary policy helped bring down annual inflation."

Egypt has imposed harsh austerity measures to try to right the economy and reduce the budget deficit. It floated the currency and started to phase out subsidies on many goods and services, including hiking fuel prices as much as 50 percent, and electricity rates by about 25 percent.

Consumer prices spiked in September but Lall said the central bank was committed to bringing inflation down to single digits in the medium term.

Lall said the reforms are working, cutting the deficit in half to 2.4 percent of GDP, and boosting growth to 5.3 percent.

At the same time the government has implemented "comprehensive efforts to improve the living standards of the most vulnerable," he said.

Since the 2011 revolt that toppled former president Hosni Mubarak, the economy of the Arab world's most populous country has received multiple shocks caused by political instability and security issues.

In September, a World Bank court fined Egypt over $2 billion for failing to supply natural gas to a Spanish-Italian-owned plant in the chaos that followed the 2011 uprising in the country.

The International Centre for Settlement of Investment Disputes ruled Cairo must pay the hefty fine to Union Fenosa Gas - a joint venture between Spain's Naturgy and Italy's Eni - The Financial Times reported.

The ruling has come after Egypt stopped supplying the venture's plant in the northern city of Damietta as the country faced internal energy shortages in 2012.

Union Fenosa Gas filed the case against Egyptian authorities in 2014.

The report said Egypt will likely pay the fine by renewing gas supplies to the natural gas plant.

Earlier this year, a Swiss court ordered Egyptian energy companies to pay $3 billion in compensation to Israeli companies after Egypt cut off supplies of natural gas in 2012.

Egyptian authorities raised natural gas prices for households and businesses in July by up to 75 percent.

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