The Egyptian government has admitted that it was having a difficult time meeting deadlines and goals on an $8 billion loan program with the IMF owing to the regional challenges it is facing, Bloomberg reports.
The most prevalent aspect of this problem is the disruption of maritime trade by pirates.
Mostafa Madbouly, Egypt’s prime minister, noted that the country is facing “unprecedented” problems in the Middle East, specifically the drop in Suez Canal revenue brought on by Houthi terrorists attacks in the Rea sea.
As a result, the head Washington-based lender Kristalina Georgieva, would be in the North African country within the next ten days.
“We have been very open to adjust the Egyptian program or any any other program to what is best to serve the people,” the director relayed to the media.
She noted that reforms to the Egyptian economy must continue to be implemented. “Egypt is better served by undertaking reforms sooner rather than later,” she said.
“We are not going to do our job for the country and for the people of the country if we pretend that action that needs to be taken can be forgone,” she added.
Egypt’s promising economy
A recent Reuters poll, revealed that the Northern African country is prime for more economic growth.
The poll showed that the year ending in June 2025 will see Egypt’s economic growth reach 4.0%.
“The median forecast in the Oct. 9-23 Reuters poll of 13 economists predicted gross domestic product (GDP) growth would then accelerate to 4.7% in 2025/26 and 5.3% by 2026/27,” Reuters revealed.
The poll results also acknowledged that the conflict in the region is constituting a roadblock to economic growth.
“In 2023/24, GDP growth fell to 2.4% from 3.8% a year earlier, according to central bank figures, dragged down by a currency crisis and the war in neighboring Gaza, which has cut into Suez Canal revenue and slowed tourism.”
The conversation surrounding the $8 billion loan not only highlights challenges, but also recognizes the sustainability of the loan.
A different Reuters report revealed that Egypt’s $8 billion loan package is “still appropriate” in size according to the IMF, as the group looks to prioritize evaluating the effectiveness of the nation’s social protection initiatives.
On Thursday, the IMF indicated that it was engaging Egyptian authorities to figure out ways to enhance the social protection program’s outreach and ensure that it was adequate.
“This will be one of the priority issues that the managing director will raise and will discuss – how effective the social protection programs are,” Jihad Azour, the IMF director for the Middle East and Central Asia Department, said in a briefing.
Egypt’s recent loans
The approval from the executive board increased the Extended Fund Facility arrangement from the initially approved $3 billion in December 2022 to $8 billion.
The loan had come after Egypt signed a $35 billion loan agreement with the United Arab Emirates (UAE), and also decided to increase its interest rates, which allowed its currency to depreciate by more than 35%.
Egypt’s deal with the UAE is the largest in the country’s history. The agreement is designed to promote the country’s economic recovery by harmonizing the official currency rate of E£30.90/US$1 with the black market rate of E£60.0/US$1.
Egypt, currently one of the IMF’s largest borrowers, expects $1.2 billion in further credit from the agency.
With the devaluation and guarantees in place, investors drawn to high returns and a more inexpensive currency have poured into Egypt’s local bonds at an unprecedented rate.