The Executive Board of the International Monetary Fund (IMF) on Friday approved US$5.2 billion loan for Egypt to respond to COVID-19 economic crisis. The 12-month Stand-by Arrangement would help meet Egypt’s balance of payments needs as well as finance its budget deficit.
The $5.2 billion loan for Egypt is the highest financial assistance for any country in Africa to combat COVID-19, second only to the $3.4 billion loan the IMF granted Nigeria last April. The new approval pushes the total loans granted African countries to respond to the pandemic to over $15 billion so far, or the equivalent of 15 years in loan prior to the pandemic when the IMF was granting Africa only about $1 billion a year.
IMF said the Fund-supported program would also help Egypt preserve the achievements made over the past four years, support health and social spending to protect vulnerable groups, and advance a set of key structural reforms for sustained recovery.
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According to the IMF, Egypt was one of the fastest growing emerging markets prior to the COVID-19 outbreak. However, the significant domestic and global disruptions from the pandemic have worsened the economic outlook and reshuffled policy priorities.
Ms. Antoinette Sayeh, IMF Deputy Managing Director and Acting Chair, said “over the past few years, Egypt saw strong growth, falling unemployment, moderate inflation, buildup of strong reserve buffers, and significant reduction in public debt.”
“The authorities were looking to broaden and deepen structural reforms begun under the Extended Fund Facility, but the COVID-19 pandemic has temporarily refocused government priorities to address the economic and health crisis,” she said.
Ms. Sayeh said “the new Stand-By Arrangement, together with recent RFI, supports the authorities’ ongoing efforts to mitigate the economic and social impact of the crisis while maintaining macroeconomic stability and safeguarding past achievements.”
“Together with the support of Egypt’s development partners, disbursements from the SBA will help address large financing needs.
“Policies supported by the SBA will focus on addressing the immediate crisis needs including critical spending on health, social programs to protect the most vulnerable, and assist directly affected sectors while safeguarding medium-term fiscal sustainability, anchoring inflation expectations, and preserving exchange rate flexibility.
“Structural reforms will aim to continue strengthening the frameworks for public finances, improve governance and transparency, and reduce barriers to competition to ensure a path towards sustainable and inclusive private sector-led growth,” she said.