Egypt’s IMF loan to be repaid in 10 years
Egypt’s $12 billion three-year IMF loan program will be repaid in 10 years with a 4.5 year grace period and the reforms agreed with the international lender aim to boost growth and curb inflation, the finance ministry said yesterday. It said the reforms target GDP growth of 5.5 percent and inflation of less than 10 percent by the 2018-19 fiscal year. The International Monetary Fund approved on Friday a program aimed at helping Egypt close its budget gap and rebalance its currency markets. Egypt’s headline inflation was near 14 percent in October and the economy grew 4.3 percent in the 2015-16 fiscal year.
Meanwhile, Egypt’s stock market rose sharply early yesterday in heavy volume, heading for a 12th straight session of gains following the International Monetary Fund’s approval of a three-year, $12 billion loan for the country. The IMF has already disbursed an initial installment of $2.75 billion to Egypt’s central bank. The IMF loan approval had been widely expected, but this plus Egypt’s decision to float its currency on Nov. 3 has made investors optimistic that the market can look forward to major inflows of foreign money.
Analysts at Bank of America Merrill Lynch recommended buying Egyptian Treasury bills unhedged, reviving a trade that had been popular among foreign investors before political upheaval in 2011 ushered in years of economic instability. Egypt’s bluechip stock index climbed 2.6 percent in trading volume that looked set to be the biggest daily amount on record. Financials and exporting firms were some of the top gainers, with Egypt Kuwait Holding jumping 6.3 percent and Arabian Food Industries rising as much as its 10 percent daily limit. A few blue chips declined on profit-taking following strong gains over the past week. Telecom Egypt was down 1.7 percent. The broader stock market index was up 2.0 percent.
Yields on Egypt’s three- and nine-month Treasury bills fell yesterday in the second auction since the central bank floated the pound currency, with bids submitted for ninemonth bills roughly four times more than the amount accepted. Yields on the 91-day bill dropped to an average of 18.028 percent from 19.055 percent the last time similar bills were sold. Yields on the 273-day bill declined to an average of 18.715 percent from 20.367 percent at the last similar auction. —Reuters