Egypt Edges Closer to Final IMF Nod for $12 Billion Loan

EghtesadOnline: Egypt is making “very good progress” toward securing the additional financing required to seal a $12 billion loan accord with the International Monetary Fund, the lender’s largest ever in the region, a senior government official said.

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21 September 2016

“It shouldn’t be a concern,” Deputy Finance Minister Ahmed Kouchouk told reporters at a two-day Euromoney conference that began on Monday in Cairo, reports Bloomberg.

A sign-off from the IMF would release the first tranche of a three-year loan signed in August, which officials expect will attract aid and investment to an economy hampered by a foreign currency shortage. Egypt’s international reserves of $16.6 billion are still around 50 percent below their pre-2011 levels when President Hosni Mubarak was ousted from power, while the pound has been trading on the black market at around a 30 percent discount to the official rate against the dollar.

Part of the funding required by the IMF is coming from oil-rich Gulf Arab states, which have already pumped billions of dollars into the economy since the 2013 ouster of Islamist President Mohamed Mursi. It also plans to sell between $3 billion and $5 billion in international bonds.

“Rates will be determined by the market, no decision has yet been made on the timing,” Kouchouk said when asked later by Bloomberg on potential borrowing costs.

Ahead of the IMF financing, the government introduced a value-added tax, raised electricity prices and sought other cost savings to shrink one of the Middle East’s highest budget deficits. Economists say inflation, currently almost 16 percent, may reach 20 percent by the end of the year with the VAT. The new tax led the World Bank and the African Development Bank to release $1.5 billion of previously agreed loans.

Egypt is also in talks with China for $4 billion in loans to fund sewage and renewable energy projects, International Cooperation Minister Sahar Nasr told reporters in Cairo.