IMF, US pledge further support for Egypt amid economic crisis

IMF, US pledge further support for Egypt amid economic crisis
Based on the agreement with the IMF, Egypt would benefit from a US$3 billion loan over 46 months under the Extended Fund Facility.
4 min read
Egypt - Cairo
11 January, 2024
A high-level Egyptian delegation has been on a visit to DC to garner financial support amid the economic crisis. [Getty]

In what has been viewed as a positive sign despite the absence of solid promises, the US Secretary of Treasury Janet Yellen and the International Monetary Fund (IMF) Managing Director Kristalina Georgieva said this week they would further back Egypt's ailing economy.

During a meeting with an official Egyptian delegation visiting Washington DC, Yellen reiterated her department's support for Egypt's economic reform programme, an official statement by the country's finance ministry said on Wednesday evening.

The Central Bank of Egypt (CBE) Governor Hassan Abdalla, Finance Minister Mohamed Maait, and International Cooperation Minister Rania Al-Mashat have been on an official visit to Washington DC this week, where they also met the IMF chief.

Georgieva posted on X, formerly known as Twitter, that "the IMF remains a strong partner to Egypt in these difficult times" without elaborating further.

Egypt's state-owned Al-Ahram news outlet reported citing whom it described as sources close to the ongoing discussions as saying that the Washington meetings aim to increase the current US$3 billion Extended Fund Facility (EFF) approved in December 2023, especially since the IMF has recently increased its member countries' quota by 50 per cent. 

In November last year, Georgieva told Reuters, on the sidelines of the Asia Pacific Economic Cooperation Summit, that the IMF had been "seriously considering" boosting its loans to Egypt as the economic impact of Israel's onslaught on the neighbouring Gaza Strip took hold.

It remains unclear, however, how much the IMF loan could be raised or when this measure is expected.

"Egypt has been seeking the blessings of the US to resume talks on doubling the IMF package given the recent political and economic challenges - the Israeli offensive on Gaza that had impacted tourism and energy imports from Israel," a prominent socio-economic expert told The New Arab on condition of anonymity.

Based on the agreement with the IMF, Egypt would benefit from a US$3 billion loan over 46 months under the Extended Fund Facility.

But since the deal was reached, two expected reviews stipulated by the IMF for Egypt to receive the loan have been postponed.

Unconfirmed reports suggested that the reviews had been postponed for President Abdel Fattah al-Sisi to secure his third and, supposedly, last presidential term without his popularity being influenced by the present economic woes. The election results Sisi swept last month were a foregone conclusion.

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The Egyptian pound has been struggling against the US dollar for months, leading prices of consumer products to hike, primarily since Egypt depends on importation rather than domestic production, especially wheat, the most strategic commodity for the country, 

"The low and average-income households are the ones heavily crushed under the economic crisis in a country where almost 28 per cent of the nearly 105 million population live below the poverty line," the analyst argued.

Egypt's external debt soared by 5.1 per cent during the fourth quarter of 2022, reaching US$162.94 billion, a total of US$10 billion more than the previous quarter.

The Egyptian government has started selling state assets, including army-owned firms, to wealthy Gulf nations, a move meant to attract foreign currency and loosen state control over the economy.

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Meanwhile, the Egyptian delegation's visit to DC is expected to include in the coming hours talks with executives from the World Bank (WB) in a bid to garner more finances and to follow up on the progress made in the current initial public offering (IPO) programme

Egypt had earlier hired the International Finance Corporation, the WB's financial arm, as the technical advisor of the IPO programme.

A mission from the World Bank has already been on a multi-day visit to Cairo to discuss the development of the country's State Ownership Policy Document and the means to handle these assets.

Egypt has encountered a huge financing gap surpassing US$8 billion for the fiscal year 2023/2024, which could amount to over US$20 billion in four years.

The Egyptian delegation's visit to DC comes as US Secretary of State Antony Blinken has been on a Middle East tour, his fourth since the Israeli offensive on Gaza first broke out on 7 October 2023 to confer the ongoing conflict between Israel and the Palestinian Hamas faction, which rules Gaza.

The Israeli aggression has so far claimed the lives of more than 23,000 Palestinians. At the same time, about 1.9 million people, almost 85 per cent of Gaza's population, have been internally displaced, according to official figures.