Egypt’s currency is poised for a boost next week with the receipt of the first tranche of an expanded loan agreement with the International Monetary Fund.
Prime Minister Mostafa Madbouly confirmed the upcoming financial injection during a news conference on March 30 but did not disclose the specific amount, according to a report by Reuters.
However, the IMF announced on March 29 that the expanded $8 billion financial support program would enable the immediate release of $820 million to Egypt.
This financial influx is part of an augmented arrangement following a $3 billion, 46-month Extended Fund Facility agreement with the Washington-based lender signed in December 2022.
The initial agreement faced delays as the country was slow to meet certain conditions, including the detachment of its currency from a fixed peg, accelerating the privatization of state-owned assets, and executing a series of economic reforms.
The upcoming tranche is a pivotal step in Egypt’s efforts to stabilize its economy, fulfill reform commitments, and foster a climate conducive to sustainable growth and development.
Furthermore, the country’s currency has been stable to the dollar after the central bank let the pound plunge and pledged to shift to a more flexible exchange rate system earlier in March.
The currency stayed in the same range it had settled at since its initial devaluation, which was at around 49 pounds to the dollar.
Before its last devaluation and steep interest rate hike, the central bank had held the currency for about a year at just under 31 pounds to the dollar.
A more flexible exchange rate, a key demand from the IMF, is seen as crucial for restoring investor confidence in an economy that has been hobbled for the last two years by a foreign currency shortage.
The central bank said it was committed to allowing the exchange rate to be determined by market forces and unifying the official and black-market exchange rates.
Under the IMF program, Egypt has committed to undertake structural reforms to stabilize prices, manage the debt burden and encourage private sector growth.
The country has already devalued its currency three times recently, but had previously held back from fully floating the pound amid concerns for the impact on Egyptians, two-thirds of whom live on or below the poverty line.
The economy, dominated by military-linked enterprises and focused on expensive infrastructure megaprojects, has been hit hard by recent shocks.
Investors pulled billions out of the country when Russia invaded Ukraine and the cost of wheat and other imports surged. Remittances from overseas Egyptian workers, a key source of foreign currency, slumped by as much as 30 percent in July-September 2023 alone.
Moreover, the other main source of foreign currency, Suez Canal revenue, has been cut in half by Houthi attacks in the Red Sea.