Egypt to turn once again to the International Monetary Fund (IMF), which on June 26 agreed to the former’s request for a one-year, USD 5.2 bn (EGP 84 bn) financing package, as the country’s economy reels from the Coronavirus financial fallout, Invest-Gate reports.
The approval of the fund’s Standby Agreement (SBA) allows for the immediate disbursement of USD 2.8 bn (EGP 44.8 bn) in emergency aid secured a month ago, while the remainder will be phased over two reviews, the IMF said in a recent press release.
The move aims to boost Egypt’s social spending, spur job creation, maintain financial stability to keep a lid on inflation, and advance structural reforms to “put Egypt on a strong footing for sustained recovery,” the IMF underlined.
“After a strong track record of successfully completing a home-grown economic reform program, supported by the IMF’s Extended Fund Facility in 2016-2019, Egypt was one of the fastest-growing emerging markets prior to the COVID-19 outbreak. However, the significant domestic and global disruptions from the pandemic have worsened the economic outlook and reshuffled policy priorities,” read the statement.
“The government has responded decisively to the crisis with a comprehensive package that supports healthcare needs, the economy, and the most affected individuals and sectors. The Central Bank of Egypt (CBE) has also taken several actions to support economic activity and borrowers,” it added.
Due to the Coronavirus headwinds, panic is looming over Egypt, which targets as much as USD 8.5 bn in total from the IMF under the SBA, enabling the fund to lend loans over a short period of time with fewer restrictions than other programs. This would come in addition to seeking USD 4 bn from other institutions, an anonymous official recently told Bloomberg.
On June 23, eight Egyptian and international civil society organizations urged the Washington-based institution to delay the vote on the financing package, citing concerns about corruption and poor governance.
“We urge the IMF to only approve the loan if there are sufficiently rigorous anti-corruption requirements in line with the Framework on Enhanced Governance, adopted by the fund in 2018, as well as its commitments to ensuring its response to COVID-19 consistently includes effective anti-corruption requirements and robust engagement with civil society,” read their official letter to IMF executive directors.
Dig deeper into the challenges stress-testing Egypt’s economy, which drove the government to resort to some flexible borrowing alternatives, by reading our latest article on the matter … Click here to read the full piece!