IMF Approves Egypt's Expanded, $8 Bln Loan Program

FILE PHOTO: A general view shows a crowd and shops at Al Ataba, a market in central Cairo, Egypt February 10, 2020. REUTERS/Mohamed Abd El Ghany/File Photo
FILE PHOTO: A general view shows a crowd and shops at Al Ataba, a market in central Cairo, Egypt February 10, 2020. REUTERS/Mohamed Abd El Ghany/File Photo
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IMF Approves Egypt's Expanded, $8 Bln Loan Program

FILE PHOTO: A general view shows a crowd and shops at Al Ataba, a market in central Cairo, Egypt February 10, 2020. REUTERS/Mohamed Abd El Ghany/File Photo
FILE PHOTO: A general view shows a crowd and shops at Al Ataba, a market in central Cairo, Egypt February 10, 2020. REUTERS/Mohamed Abd El Ghany/File Photo

Egypt received approval on Friday from the International Monetary Fund's executive board for an expanded, $8 billion financial support program that enables the immediate release of $820 million, the IMF said in a statement.
"The difficult external environment generated by Russia’s war in Ukraine was subsequently aggravated by the conflict in Gaza and Israel, as well as tensions in the Red Sea," the IMF statement said.
The agreement expanded on an earlier $3 billion, 46-month Extended Fund Facility signed in December 2022 which was put on hold after Egypt did not follow through on pledges to unpeg its currency, speed up the sale of state assets and implement other reforms.
The expanded agreement was first announced on March 6, when Egypt's central bank hiked key interest rates by six percentage points and allowed the country's currency to plummet against the dollar.
"A strong economic stabilization plan is being implemented to correct policy slippages," the IMF said, focusing on a liberalized foreign exchange system, tightening of fiscal and monetary policy, reduced public investment and greater space for the private sector.
This would include a continued reduction of subsidies, which consume a large portion of government expenditures. Last week Egypt raised prices on a wide range of fuel products.
"It remains essential to replace untargeted fuel subsidies with targeted social spending as part of a sustained fuel price adjustment package," the IMF statement said.
The IMF also said Egypt had established a new framework to monitor and control public investment that would help manage excess demand, but that the state and military would need to withdraw from economic activity.
"Integrating transparently off-budget investment into macroeconomic policy decision making will be critical," it added.



Egypt's Central Bank Leaves Key Interest Rates Unchanged

A general view of Dahab Island or Gold Island (Gezirit el-Dahab) in the middle of the Nile River in Cairo, Egypt, July 2, 2024. REUTERS/Amr Abdallah Dalsh
A general view of Dahab Island or Gold Island (Gezirit el-Dahab) in the middle of the Nile River in Cairo, Egypt, July 2, 2024. REUTERS/Amr Abdallah Dalsh
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Egypt's Central Bank Leaves Key Interest Rates Unchanged

A general view of Dahab Island or Gold Island (Gezirit el-Dahab) in the middle of the Nile River in Cairo, Egypt, July 2, 2024. REUTERS/Amr Abdallah Dalsh
A general view of Dahab Island or Gold Island (Gezirit el-Dahab) in the middle of the Nile River in Cairo, Egypt, July 2, 2024. REUTERS/Amr Abdallah Dalsh

Egypt's central bank left its overnight interest rates unchanged on Thursday, as expected, saying economic growth remained slow but that inflation has been decreasing.
The bank's Monetary Policy Committee (MPC) left the deposit rate at 27.25% and the lending rate at 28.25%.
All but one of 18 analysts in a Reuters poll had expected rates to remain unchanged, with the sole analyst forecasting a cut of 100 basis points (bps).
The decision keeps the overnight deposit rate below that of headline inflation, which was 27.5% in June. Real interest rates have been negative since January 2022. Inflation declined in June for a fourth straight month after soaring to a record 38% in September.
The MPC expects inflation to come down sharply in the first half of 2025.
"The gradual unwinding of food inflation along with the improvement of inflation expectations suggest that inflation is on a sustained downward trajectory," the MPC said.
Gross domestic product inched down to an annualized 2.2% in the first quarter from 2.3% in the final quarter of 2023, the MPC added.
"Leading indicators for Q2 2024 suggest that economic activity remains subdued. Consequently, real GDP growth is expected to slow down in FY 2023/24 compared to the previous fiscal year, before recovering in FY 2024/25," it said.
Egypt reported GDP of 3.8% in 2022/23.
The central bank raised interest rates by 600 bps on March 6 as part of an agreement with the IMF, bringing total increases since the beginning of the year to 800 bps. Egypt also sharply devalued its currency against the dollar under its IMF accord.