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Egypt Secures Agreement With IMF to Increase Bailout Loan to $8 Billion

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Egypt announced on Wednesday that it has finalized an agreement with the International Monetary Fund (IMF) to increase its bailout loan to $8 billion.

Prime Minister Moustafa Madbouly revealed this development in televised statement. The negotiations, ongoing for months, aimed to boost a previous $3 billion bailout loan established with the IMF in 2022.

According to Madbouly, the new agreement will facilitate Egypt’s access to loans from other financial entities, including the World Bank.

The announcement coincided with significant monetary policy adjustments by Egypt’s Central Bank, which raised its main interest rate and allowed the currency to float freely.

These measures, long urged by the IMF, seek to counteract inflationary pressures and attract foreign investment amid a severe shortage of foreign currency in the country.

Following the currency’s flotation, the Egyptian pound experienced a rapid devaluation, losing over 60% of its value against the US dollar within hours. Commercial banks adjusted their exchange rates accordingly, with the dollar now trading at more than 50 pounds for $1, compared to around 31 pounds before.

The Central Bank raised the key interest rate by 600 basis points to 27.75%, while the overnight deposit and lending rates were also increased by 600 basis points to 27.25% and 28.25%, respectively.

Egypt’s economy has faced significant challenges in recent years, including government austerity measures, the impact of the COVID-19 pandemic, repercussions from the conflict in Ukraine, and the recent Israel-Hamas conflict in Gaza.

The conflict in Ukraine, particularly disruptive to the global economy, exacerbated Egypt’s financial vulnerabilities. As the most populous Arab nation and the world’s largest importer of wheat, Egypt heavily relies on foreign purchases to sustain its food supply for over 104 million citizens.