IMF deal to help Egypt cope with pandemic fallout

Agreement reached on preliminary on $5.2 billion standby loan.
Saturday 06/06/2020
A woman buys vegetables from a cafe transformed into a vegetable shop as cafes have been shut following the pandemic, in Cairo. (REUTERS)
A woman buys vegetables from a cafe transformed into a vegetable shop as cafes have been shut following the pandemic, in Cairo. (REUTERS)

CAIRO-International Monetary Fund (IMF) announced, Friday, a preliminary deal on $5.2 billion standby loan for Egypt  to help the most populous Arab country alleviate the economic impact of the COVID-19 pandemic.

In response to a request from the Egyptian authorities, an IMF Fund mission led by Uma Ramakrishnan held virtual meetings from May 19 to June 5, 2020 to discuss financial support for the Cairo’ policy plans to ensure macroeconomic stability and a strong economic recovery”, the IMF said in a statement.

“The agreement, which must be finalised by the Fund’s executive board, would safeguard economic gains achieved by Egypt over the past three years and put the country on strong footing for a sustained recovery,” said Ramakrishnan.

“The Stand-By Arrangement (SBA), with requested access of SDR 3.8 billion (equivalent to around US$5.2 billion), supports the authorities’ efforts to maintain macroeconomic stability amid the COVID-19 shock while continuing to advance key structural reforms”, the IMF official added.

The SBA will also aim to support health and social spending, improve fiscal transparency, and advance further reforms to spur private-sector-led growth and job creation, according to Ramakrishnan.

The standby arrangement comes on top of $2.77 billion in emergency IMF financing for Egypt, where the pandemic has brought tourism to a standstill, triggered major capital flight, and curtailed remittances from Egyptian workers based abroad.

An Egyptian vendor wearing a face mask stands on the middle path in Cairo, amid the Coronavirus outbreak. (DPA)
An Egyptian vendor wearing a face mask stands on the middle path in Cairo, amid the Coronavirus outbreak. (DPA)

The IMF’s rescue aims at safeguarding the gains achieved by Egypt over the past three years and putting the country on strong footing for sustained recovery and higher and more inclusive growth and job creation over the medium term.

Economists, who said Egypt began negotiating the standby loan before the onset of the coronavirus pandemic and after completing a $12 billion, three-year program with the IMF last year, had anticipated that the Fund would be looking for at least a moderate currency devaluation.

From his part, the Egyptian finance ministry said, the agreement proves the continued confidence of international institutions, especially the IMF, in Egypt’s economic, monetary and financial policies as well as the country’s handling of the coronavirus pandemic.