IMF approves last instalment of $12b loan to Egypt

Cairo: The International Monetary Fund said it has approved the last instalment of a $12 billion (Dh44 billion) loan to Egypt, marking the end of a three-year programme that helped the Arab country overcome a crippling dollar shortage but drew criticism for painful austerity measures.

The final payment of $2 billion will be transferred this week, Egyptian central bank Governor Tarek Amer said.

Egypt secured the agreement in 2016 after taking measures that included devaluing its currency and slashing costly fuel subsidies.

The country has since attracted tens of billions of dollars into its debt market and the central bank’s foreign reserves have surged to more than $44 billion.

“The macroeconomic situation has improved markedly since 2016, supported by the authorities’ strong ownership of their reform program and decisive upfront policy actions,” acting IMF managing director David Lipton said in the statement.

“The outlook remains favourable and provides an opportune juncture to further advance structural reforms to support more inclusive private-sector led growth and job creation.”

Critics of the programme say the weaker currency and subsidy cuts have eroded the purchasing power of the middle class. And while the economy is growing at the fastest pace in years, private-sector activity remains subdued.

The latest round of fuel subsidy cuts prompted the central bank to keep its benchmark interest rate unchanged this month at 15.75 per cent even after inflation dipped in June to below 10 per cent for the first time since March 2016.

The central bank should “remain cautious until disinflation is firmly entrenched,” Lipton said. “Exchange rate flexibility remains essential to improve resilience to shocks and preserve competitiveness.”