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Egypt has for months negotiated with the IMF to increase a USD 3 billion bailout loan that both parties reached in 2022
Egypt has reached a deal with the International Monetary Fund (IMF) to increase a bailout loan to USD 8 billion, according to Prime Minister Moustafa; he said this in televised comments yesterday (Wednesday), adding that Egypt has for months negotiated with the IMF to increase a USD 3 billion bailout loan that both parties reached in 2022.
Madbouly said the new deal will enable the government to receive loans from other financial institutions including the World Bank. Importantly, Egypt’s Central Bank raised its main interest rate and floated the currency to combat inflationary pressure and attract foreign investment. The country is facing a severe shortage of foreign currency.
Following the currency announcement, the pound began floating and within hours lost more than 60% of its value against the dollar. By early afternoon, commercial banks were trading the U.S. currency at more than 50 pounds for one US dollar, up from about 31 pounds for the dollar. The interest rate increase was a meaty 600 basis points to 27.75%. Deposit and lending rates ruled at at 600 basis points to 27.25% and 28.25% respectively.
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Several factors contributed to the downside of the Egyptian economy, such as the government austerity, the coronavirus pandemic, the fallout from the war in Ukraine, and most recently, the Israel-Hamas war in Gaza.
