Egypt, IMF Reach Initial Deal for $1.2 Billion Loan Tranche
Egypt and the International Monetary Fund reached a preliminary deal that would likely unlock a further tranche of the North African nation’s $8 billion loan.
The staff-level agreement, announced on Tuesday by the IMF, puts Egypt on track for access a disbursement of about $1.2 billion. It still needs to be signed off by the Washington-based lender’s executive board.
“Looking forward, reform priorities comprise boosting domestic revenues, improving the business environment, accelerating divestment, and leveling the playing field while enhancing governance and transparency,” the IMF said in its statement.
The accord was much anticipated after an IMF mission visited Cairo in November to discuss Egypt’s progress in implementing the 46-month program — a keystone of a $57 billion global bailout for the Middle East’s most populous country.
The IMF deal seeks to restore macroeconomic stability in Egypt after a two-year financial crisis with moves including cutting government spending and raising revenue by offering state assets to investors while boosting the private sector.
Authorities let the pound weaken around 40% against the dollar and enacted three fuel-price hikes this year, while also increasing prices for electricity and subsidized bread.
The government recently suggested taking further steps was becoming increasingly difficult without placing an unbearable burden on Egypt’s 107-million-plus population, the Middle East’s largest.
Maintaining a flexible exchange rate is also a major target. The pound has fallen to a record low of 51 per dollar this week, partly due to redemptions of shorter-term Treasury-bills that were issued earlier this year.
November also finally saw some movement on the divestment program, with authorities selling of 30% of United Bank, a state-owned lender. The government says it’s planning to offer at least 10 assets to strategic investors or on the stock market next year, including four affiliated with the military.
Still to come may be changes to value-added tax, potentially by canceling some exemptions rather than increasing the rate.
