Egypt’s cabinet announced in a statement Tuesday that it was close to securing a $12bn loan agreement with the International Monetary Fund (IMF) as part of the effort to secure $21bn, in order to ease the current account deficit and dollar shortage.
Prime Minister Sherif Ismail stressed the importance of cooperation with the IMF through a support programme to restore international confidence in the Egyptian economy and attract foreign investment, which in turn will lead to achieving monetary and financial stability.
The government is seeking to secure $21bn from different sources. The main funds will be from the IMF: $12bn in total, $4bn per year, which will carry an interest rate of 1% or 1.5% The rest of the funds will be from the World Bank, the African Development Bank, and international bonds, according to Minister of Finance Amr El-Garhy.
The IMF welcomed the Egyptian statement and announced that there will be a mission sent to Egypt to discuss the details, the visit will last two weeks starting 30 July.
Many economists reviewed the news positively, as a way out for Egypt’s plummeting currency problems which forced Egypt to impose capital control and had a negative impact on both trade and growth.
“Securing the loan is a necessary step in the short run to resolve the foreign currency shortage and restore confidence in the Egyptian economy,” said Abou Bakr Imam, head of the Research Department at Prime Holding.
He added that the most important step is to carry out a decisive economic reform plan that includes devaluating the currency to abolish the informal market, integrating the informal economy to increase tax revenues, converting to cash subsidies, reducing interest, and reforming the investment laws to attract more investments.
Furthermore Beltone Financial announced that the time is right to abolish the foreign currency exchange rate control, indicating that the gap between the official and the parallel US dollar rates is narrowing. The unofficial prices decreased from EGP 13 to EGP 12.6, which shows that the fair price for the US dollar is not far from the EGP 11-12 range, and that it might be closer to EGP 10.