Egypt has reached a preliminary agreement with the International Monetary Fund after almost two weeks of talks to secure a $12 billion lending program and will make an announcement on Thursday, two government sources said.
Advertisement
In a statement on Thursday, the International Monetary Fund says the loan, which is subject to approval by the IMF’s Executive Board, comes in support of the government’s program to reform the economy.
“Egypt is a strong country with great potential but it has some problems that need to be fixed urgently”, an International Monetary Fund statement said, adding that government measures include tax increases and cuts in electricity subsidies. A dollar shortage has also exacerbated economic problems.
The IMF said the program aims to improve the functioning of the forex markets and bring down the budget deficit and government debt. Egypt’s stock market edged up 1.1 percent by mid-afternoon.
“The IMF deal has been reached upon an Egyptian programme, which gives the message that Egypt is serious in implementing economic reforms”, Amer said.
“In the near term, high inflation and tighter monetary and fiscal policy will prevent domestic demand from strengthening significantly”. Please see our terms of service for more information. Egypt earlier this week already announced it would raise electricity prices by a least a quarter, a jump forward in its plans to eliminate the subsidies altogether by 2019.
Amid political unrest, tourists and overseas investors stayed away, meaning that the country’s foreign currency reserves plummeted and growth slowed. “This would foster growth and jobs and reduce financing needs”, he said. The central bank has weakened the Egyptian pound, but has failed to quash black market sellers, who offer discounts on official rates.
They are now at about $15.5 billion, enough for under three months of imports and less than half their pre-2011 levels. He did not say if Egypt had committed to easing its exchange rate policy as part of the deal.
Advertisement
Cairo had been in the talks with the fund to secure the loan programme. But the cash has yet to be disbursed as the Bank waits for parliament to ratify reforms, including Value-Added Tax which has faced opposition.
