Egypt clinches $3 billion IMF deal and devalues pound again
Cairo, October 28, AZERTAC
Egypt agreed on a $3 billion loan with the International Monetary Fund after sharply devaluing its currency as it seeks to shore up an economy battered by the fallout from Russia’s invasion of Ukraine, according to Bloomberg.
The North African nation, which has faced soaring import bills and an exodus of foreign money due in part to the conflict, will also receive $5 billion from international partners to help finance the country’s external funding gap, Egyptian officials told a news conference on Thursday. A further $1 billion from a newly created sustainability fund is also on the table, according to the IMF.
In what could signal a longer-term shift in its currency policy, the central bank said earlier it was adopting a more flexible exchange-rate regime. It also raised official borrowing costs by 200 basis points at an unscheduled meeting.
The flexible exchange-rate policy leaves the forces of supply and demand to determine the value of the Egyptian pound against other currencies, the central bank said in a statement. The pound fell at least 15%, surpassing the magnitude of its devaluation on March 21.
The “move to a flexible exchange rate regime is a significant and welcome step to unwind external imbalances, boost Egypt’s competitiveness, and attract foreign direct investment,” the IMF said in a statement announcing the 46-month Extended Fund Facility.
Gulf Arab allies have pumped billions of dollars of support into Egypt’s economy, over concern about the stability of the Arab world’s most populous nation.
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