IMF extends Egypt's loan programme to US$8 billion after massive drop in Egyptian pound value

The International Monetary Fund (IMF) has extended Egypt's loan programme to US$8 billion, a few hours after the country officially implemented a flexible exchange rate of the local pound against the US dollar on Wednesday morning.

Egypt's Prime Minister Mostafa Madbouly told reporters in Cairo that the IMF programme targets vibrant indicators, including raising Egypt's hard currency reserve, reducing domestic and foreign debt, ensuring the flow of direct foreign investments and promoting the country's economic growth rate.

Egypt will also receive a loan of around US$1.2 billion from a separate facility that promotes environmental sustainability. 

Last month, an IMF delegation, led by Hollar, had been on an official visit to Egypt for discussions with the government that lasted for almost three weeks, during which the international institution carried out the first and second reviews of Egypt's reform programme supported by the fund's Extended Fund Facility (EFF).

Earlier in the day, the Central Bank of Egypt took measures, allowing the value of the Egyptian pound to be regulated by market forces as an attempt to alleviate an already ailing economy. 

As a result, the official value of the US dollar has surged to exceed 50 EGP for the first time in Egypt's history, compared to nearly 30.90 EGP on Tuesday.

The initial plan with the IMF had dictated that Egypt would benefit from a US$3 billion loan over 46 months under the IMF's Extended Fund Facility (EFF), provided that the country loosens state and military control over the economy and liberate the exchange rate of the local currency.

The Egyptian pound has been struggling against the US dollar for months, leading to hikes in the prices of essential commodities, especially wheat, rice, sugar, and cooking oil. This has affected low- and average-income households.

Amid economic challenges, foreign debts, and a significant budget deficit, Egypt has also been aggressively pursuing the sale of state assets to address its financial woes, being an easy way out, such as the recently signed Ras El-Hekma deal with the UAE.

Last week, the government received US$15 billion over two batches from the Ras El-Hekma deal forged with the UAE.