IMF to give Egypt access to $820m, pending board approval

Multilateral lender says Cairo has made efforts to preserve macroeconomic stability

The IMF said it had reached a staff-level agreement with Egyptian authorities on the third review of the Extended Fund Facility. AFP

The International Monetary Fund (IMF) on Thursday announced Egypt will have access to about $820 million, subject to board approval.

The IMF said it had reached a staff-level agreement with Egyptian authorities on the third review of the Extended Fund Facility, which offers a longer repayment period for countries that face serious payment imbalances because of structural weaknesses.

In a statement, the IMF's Egypt mission chief Ivanna Vladkova Hollar noted Cairo's efforts to preserve macroeconomic stability by engaging in fiscal discipline, tight monetary policy and shifting to a flexible exchange rate.

“These efforts are beginning to deliver an improved outlook, improved FX availability, inflation starting to slow down and signs of recovery in private sector sentiment,” Ms Vladkova Hollar said.

In March, Egypt secured an $8 billion loan package from the IMF on the condition that Cairo move to a flexible exchange rate system, tighten monetary policy, slow infrastructure spending and preserve debt sustainability.

Following the agreement, Egypt's central bank rose interest rates by 600 points to 27.25 per cent, which it held steady at its meeting last month.

The Egyptian pound tumbled after the central bank said its currency would freely float. As of Thursday, the pound was trading at 47.59 against the US dollar.

“The mission was encouraged by the central bank’s continuing efforts to enhance its operations … to reinforce progress towards a full-fledged inflation-targeting regime,” Ms Vladkova Hollar said.

Egypt's inflation rate is currently 32.5 per cent, versus the central bank's target range of about 7 per cent.

The IMF said Cairo should also prioritise strengthening resilience in the private sector and government practices as well as competition in the banking sector.

The IMF also pointed to the recent Ras El Hekma deal, in which Egypt secured $35 billion from the UAE to develop the coastal city, as a positive economic development“The authorities are making progress on their structural reform agenda, but there is scope to accelerate the implementation of the state-ownership policy to level the playing field and increase private sector-led growth, and to implement reforms to enhance the business environment,” Ms Vladkova Hollar said.