Egypt approved for second IMF loan of $1.25 billion

IMF gives green light for second tranche

Egypt gets approval for second IMF instalment. Mohamed Abd El Ghany / Reuters

The International Monetary Fund (IMF) said Thursday that it had approved the second tranche of funds for Egypt after reviewing the country’s economic reform programme.

The latest instalment, totaling US$1.25 billion, will bring the total amount of disbursements to about $4bn, or a third of the three-year extended fund facility. Christine Lagarde, managing director of the IMF, said that the austerity measures that Egypt is undertaking will yield results.

“The government and the central bank have taken the right measures to rein in inflation, reduce the budget deficit and set the Egyptian economy on a path to stability and growth,” she said.

The North African country has taken a number of steps to grab the $12bn loan granted in November. Egypt floated its currency to qualify for the IMF loan and help restore investor confidence. In addition, Egypt has ushered in new structural reforms geared to strengthen business, adding industrial licensing, investment and insolvency laws.

Other reforms, such as decreasing energy subsidies, have been undertaken to help further cut government spending.

David Lipton, IMF’s first deputy managing director and acting chair, said the country’s reform programme was starting off well in order to get Egypt’s economy back on track after more than six years of instability.

“The parallel market has virtually disappeared and central bank reserves have increased significantly,” he said. “Market confidence is returning and capital flows are increasing. These augur well for future growth.”