Cairo: Egypt plans to secure a $12 billion (Dh44 billion) loan from the International Monetary Fund to ease a crippling dollar squeeze and restore confidence in the economy, an accord that would be the fund’s biggest aid package in a region pummeled by political unrest and the plunge in oil prices.
Stocks surged after authorities said on Tuesday evening they will finalise terms with an IMF team set to visit Cairo from July 30. The government is targeting $21 billion over three years to finance its economic programmeme. In addition to IMF aid, $4.5 billion will come from the World Bank and the African Development Bank, Deputy Finance Minister Ahmad Kouchouk told Bloomberg, while the rest would come from bilateral accords and a planned international bond sale.
“This is good news in the sense that the deal can bring a lot of liquidity to Egypt, and boost confidence in the economy,” said Mohammad Abu Basha, a Cairo-based economist at investment bank EFG-Hermes. “But challenges still lie ahead. This is a three-year programme, with a lot to be delivered.”
Egypt is the latest country in the Middle East and North Africa to line up for IMF advice and financial aid as refugee crises, militant attacks and low oil prices batter public finances and economic growth rates. This year alone, the Washington-based lender has approved a precautionary credit line to Morocco as well as loans to Tunisia, Opec member Iraq. On Tuesday, it signed a letter of intent to renew assistance to Jordan.
Egypt reached initial accords with the IMF twice since the 2011 uprising that ousted President Hosni Mubarak to stem the plunge in foreign reserves as tourists and investors shunned the country. Authorities withdrew both requests amid a domestic debate over the fund’s past policies as well as measures required to unlock aid, including tax reforms and the restructuring of costly energy subsidies.
A deal now could help the most populous Arab country ease a dollar shortage that has stifled economic activity and fuelled speculation of another imminent currency devaluation. The dollar changed hands at 12.99 pounds on the black market on Tuesday, a 46 per cent premium over the official rate of 8.8, according to a Bloomberg survey.
The IMF’s visit is expected to last about two weeks, Masood Ahmed, director of the Middle East and Central Asia Department, said on Tuesday.
Factbox: Egypt stocks rise most in world
Egyptian stocks and bonds rallied after the government said it’s negotiating with the International Monetary Fund for a loan to help revive its battered economy. The benchmark EGX 30 Index in Cairo advanced nearly 5 per cent, heading for the highest level since August 11, the biggest gain among more than 90 gauges tracked by Bloomberg globally. Commercial International Bank Egypt was the largest contributor to the jump, climbing 6.8 per cent, the most on a closing basis since March. The nation’s dollar debt due 2025 rose. The nation’s 5.875 Eurobonds due in 2025 advanced, sending the yield down 16 basis points to 7.28 per cent, the steepest decline since July 11 on a closing basis. Five-year credit-default swaps, which insure the country’s debt against non-payment, fell 9.3 per cent on Tuesday following the loan announcement, the most since December 2014. They were little changed today at 450 basis points, according to data provider CMA.