The International Monetary Fund said Thursday that it would grant Egypt a $12 billion loan over three years to help Egypt mend its ailing economy after years of unrest.
The I.M.F. said the loan, which is subject to approval by its executive board, comes in support of a government overhaul that aims to stabilize Egypt’s currency, reduce the budget deficit and government debt, and bolster growth and create jobs.
“Egypt is a strong country with great potential but it has some problems that need to be fixed urgently,” I.M.F. said in a statement, adding that the government planned to increase taxes and cut energy subsidies. Egypt said this week that it would raise electricity prices by a least a quarter, which is part of a plan to eliminate the subsidies altogether by 2019.
Egypt’s economy has struggled since the 2011 uprising that overthrew the country’s longtime autocrat, Hosni Mubarak, with high inflation, foreign currency shortages and low tourism and investment.
Cairo appealed to the I.M.F. as a last resort after exhausting billions of dollars in aid from wealthy Arab nations in the Persian Gulf, recently humbled by low oil prices — and now turned off by persistent bureaucratic hurdles to investing in Egypt.
Egypt hopes that the loan can generate momentum that will bolster growth and reassure potential investors.
The government’s economic program says it will focus on helping the poor and try to ensure that any economic rebound brings benefits to Egypt’s population of 91 million and not just its elites, as has happened during past periods of economic growth.
President Abdel Fattah el-Sisi has faced mounting criticism of his economic stewardship in recent months, and has responded with near daily appearances and statements touting his commitment to defending the poor.
Egyptian leaders have balked at I.M.F. loans in the past because they require cuts in subsidies and other measures that cause short-term pain, and could set off unrest. Frustrations over economic stagnation, inequality and perceived corruption were among the main factors behind the uprising that toppled Mr. Mubarak in 2011 and the massive protests demanding the resignation of President Mohamed Morsi in 2013.
Mr. Sisi, who led the military overthrow of Mr. Morsi, has presided over a wide-ranging crackdown on dissent that has virtually eliminated street protests.
While the I.M.F. cast the deal as supporting the government’s own economic rebound package, the lender is widely expected to have demanded the floating of the country’s overvalued currency.
Egypt’s foreign currency shortage has generated a thriving black market for United States dollars and hindered the operations of multinational companies. Despite a rising dollar, the central bank has resisted devaluation, spending billions of dollars of its own cash reserves to prop up the Egyptian pound, and only allowing a slight devaluation last year.
The lack of foreign currency has been compounded by a drop in tourism revenues after recent terrorist attacks. Egypt has also seen dwindling revenues from the Suez Canal, the crucial trading channel linking the Mediterranean to the Red Sea, because of a falloff in foreign trade, despite a costly and much-hyped expansion of the canal.
The Egyptian pound now trades about a third weaker than its official value of 8.9 to the dollar. Before the deal on Thursday, Tarek Amer, governor of Egypt’s Central Bank, said defending the pound was a “grave error.” Documents leaked to the news media showed that the bank blamed the government for forcing it to do so.
By: Associated Press.
Photo: eNCA.
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