Egypt seeks $12b IMF loan to repair battered economy

World Bank and African Development Bank to offer Cairo an additional $4.5b

Egypt plans to secure a $12 billion (Dh44 billion) loan from the International Monetary Fund to ease a crippling dollar squeeze and restore confidence in the economy, an accord that would be the fund’s biggest aid package in a region pummelled by political unrest and the plunge in oil prices.

Stocks surged after authorities said on Tuesday evening they will finalise terms with an IMF team set to visit Cairo from July 30. The government is targeting $21 billion over three years to finance its economic programme. In addition to IMF aid, $4.5 billion will come from the World Bank and the African Development Bank, Deputy Finance Minister Ahmad Kouchouk told Bloomberg, while the rest would come from bilateral accords and a planned international bond sale.

“This is good news in the sense that the deal can bring a lot of liquidity to Egypt, and boost confidence in the economy,” said Mohammad Abu Basha, a Cairo-based economist at investment bank EFG-Hermes. “But challenges still lie ahead. This is a three-year programme, with a lot to be delivered.”

Previous accords

Egypt is the latest country in the Middle East and North Africa to line up for IMF advice and financial aid as refugee crises, militant attacks and low oil prices batter public finances and economic growth rates. This year alone, the Washington-based lender has approved a precautionary credit line to Morocco as well as loans to Tunisia, Opec member Iraq. On Tuesday, it signed a letter of intent to renew assistance to Jordan.

Egypt reached initial accords with the IMF twice since the 2011 uprising that ousted President Hosni Mubarak to stem the plunge in foreign reserves as tourists and investors shunned the country. Authorities withdrew both requests amid a domestic debate over the fund’s past policies as well as measures required to unlock aid, including tax reforms and the restructuring of costly energy subsidies.

A deal now could help Egypt ease a dollar shortage that has stifled economic activity and fuelled speculation of another imminent currency devaluation. The dollar changed hands at 12.99 pounds on the black market on Tuesday, a 46 per cent premium over the official rate of 8.8, according to a Bloomberg survey.