(Bloomberg) — The International Monetary Fund approved a $5 billion augmentation to its loan program for Egypt, part of a wave of global aid pledged to bolster a stumbling economy put under added pressure by the war in Gaza.
The executive board’s assent increases the Extended Fund Facility arrangement from the $3 billion originally approved in December 2022 to $8 billion. It will enable an immediate disbursement of about $820 million, the Washington-based lender said Friday in a statement.
Egypt’s new IMF agreement was announced March 6 after authorities enacted a long-awaited currency flotation and allowed the pound to lose around 40% of its value against the dollar. Funding from a $35 billion deal with the United Arab Emirates, the largest inward investment in Egypt’s history, paved the way for the move.
“Egypt is facing significant macroeconomic challenges that have become more complex to manage given the spillovers from the recent conflict in Gaza and Israel,” IMF Managing Director Kristalina Georgieva said in the statement. “Recent measures toward correcting macroeconomic imbalances, including unification of the exchange rate, clearance of the foreign exchange demand backlog, and significant tightening of monetary and fiscal policies, were difficult, but critical steps forward, and efforts should be sustained going forward.”
The deal is part of more than $50 billion in investments, loans and grants pledged to shore up the economy of a Middle Eastern nation with a key role in managing the region’s upheaval that’s increasingly seen as too big to fail.
The nation of over 105 million people has also been hammered by conflicts elsewhere in recent years. Russia’s invasion of Ukraine drove up wheat and oil import prices that drained dollar reserves, while the spillover from the Israel-Hamas war has dented tourism and slashed Suez Canal fees, both crucial sources of hard currency.
Egypt, already the IMF’s second-biggest borrower after Argentina, expects to get access to about $1.2 billion in additional financing from the lender. Following the devaluation and pledges, investors enticed by high yields and a cheaper currency have piled into Egypt’s local bonds at a record pace.
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