The International Monetary Fund approved a $12-billion loan program for Egypt to restore investor confidence and help revive an economy battered by years of political turmoil.
The Washington-based lender’s executive board approved the three-year loan on Friday. Approval of the IMF loan program, the largest of its kind on record in the Middle East, comes a week after Egypt floated its currency to end a crippling currency crisis and raised the price of subsidised fuel to reign in one of the region’s largest budget deficits.
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The program will help Egypt restore macroeconomic stability and promote inclusive growth, the IMF said in a statement. Egypt will receive an immediate disbursement of $2.75-billion, the fund said.
The loan will help boost Egypt’s foreign currency inflows, which have dwindled since the 2011 Arab Spring uprising resulted in the ouster of longtime ruler Hosni Mubarak.
As part of its effort to increase inflows, the government plans to issue $2-billion to $2.5-billion in international bonds this year. Though the roadshow was scheduled to start in November, El-Garhy said Thursday the debt sale might be delayed due to “fluctuations in markets.”
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The central bank on November 3 removed all restrictions on the exchange rate, and raised interest rates by three percentage points so the banking system could absorb liquidity from the currency black market. Egyptian stocks gained 25 percent since then, with the pound weakening by about 45%, according to data from the National Bank of Egypt.
The measures have started to bear fruit, with lenders and businesses reporting improvements in foreign currency liquidity. — Bloomberg