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World

IMF Approves $12 Billion Loan to Salvage Egypt's Economy

The IMF made the announcement on Friday and said the loan aims to help Egypt "restore macroeconomic stability and promote inclusive growth"

This file image from March 2016 shows a man counting Egyptian pounds in a foreign exchange bureau, photo: AP/Amr Nabil
1 year ago

CAIRO – The International Monetary Fund (IMF) said on Friday that its executive board has approved a three-year bailout totaling $12 billion to Egypt, to support the country’s ailing economy — a move intended to restore investor confidence and raise the country’s foreign reserves.

The approval comes almost a week after the Egyptian government floated its currency and raised fuel prices in order to qualify for the loan. These reforms earned praise from the IMF and the international business community, but caused price hikes for an already frustrated cash-strapped population, with President Abdel-Fattah el-Sissi now risking a serious political backlash.

Egyptian Central Bank Governor Tarek Amer speaks during a press conference at the Central Bank of Egypt in Cairo, Thursday, Nov. 3, 2016. Photo: AP/Nariman El-Mofty

Egyptian Central Bank Governor Tarek Amer speaks during a press conference at the Central Bank of Egypt in Cairo, Thursday, Nov. 3, 2016. Photo: AP/Nariman El-Mofty

Days earlier, Christine Lagarde, the IMF chief, described Egypt’s reform program as “ambitious” and said it will put the country on a “sustainable path and achieve job-rich growth.”

Tarek Amer, the head of Egypt’s Central Bank, was quoted by the state-run MENA news agency as saying that the first installment has arrived at the bank and increased foreign reserves to $23.5 billion. Egypt had $36 billion in reserves before the 2011 uprising.

Years of unrest following the ouster of longtime autocratic President Hosni Mubarak in 2011 left Egypt’s economy in shambles. The vital tourism sector dried up over fears of terrorism, overseas remittances dropped because of low oil prices, and Suez Canal revenues diminished because of a decline in global trade. Investment and business activity also stalled, with inflation hitting 14 percent and unemployment 13 percent. The budget deficit currently stands at nearly 12 percent of gross domestic product and the current account deficit is at almost 7 percent.

For decades, Egyptian leaders have balked from sealing IMF loans for fear of the social unrest.

A call for mass protests dubbed “the revolution of the poor” against the latest economic measures faltered on Friday as Egyptian security forces heavily deployed on the streets of Cairo and across the country. Authorities have banned all unauthorized demonstrations and have routinely responded to protests with lethal force.

Political parties for the most part distanced themselves from the Friday protest call, and authorities have accused Islamist groups like the banned Muslim Brotherhood of engineering the protests to cause chaos.

Cairo called on the U.S.-based global lender as a last resort, after having exhausted billions of dollars in aid from wealthy Gulf Arab nations recently humbled by declining oil prices — and now turned off by persistent bureaucratic hurdles to investing in Egypt.

The loan also comes at a time when oil-rich Saudi Arabia has piled pressure on Cairo, following disputes over regional conflicts such as those in Syria and Yemen. Saudi’s Aramco, the world’s largest oil company, has indefinitely halted much-needed fuel shipments to Egypt.

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