Egypt has requested to borrow $12bn from the International Monetary Fund (IMF) over three years, thus $4bn each year, Minister of Finance Amr El-Garhy said.
He added that this loan is part of a financing agreement worth $21bn over three years to finance the economic programme, which will be agreed upon with the IMF. He said that $3bn will come from the World Bank, $1.5bn from the African Development Bank (AfDB), $3bn from a planned international bond sale, and the rest will come from other sources.
Masood Ahmed, director of the IMF’s Middle East and Central Asia Department, said that the IMF wants to help Egypt restore economic stability and support it in achieving strong and sustainable growth and providing new job opportunities.
He said in an e-mail that the Egyptian government has requested financial aid from the IMF to support its economic programme. He continued saying they welcome this request and look forward to discussing the financial policies that can help Egypt overcome its economic challenges.
The government announced earlier that it has been negotiating with the IMF for three months and a final agreement is approaching completion.
An IMF mission will arrive in Cairo within the coming days, while Prime Minister Sherif Ismail urged El-Garhy and the Central Bank of Egypt Governor Tarek Amer to complete the negotiations and submit their report to the cabinet for approval. The government will announce a financial programme to fix the economy over the coming three years through bridging the funding gap suffered by the Egyptian economy and restoring stability to the financial and monetary markets.
El-Garhy said that the government will tap the international debt markets to issue global bonds between September and October.
The IMF mission, headed by Chris Jarvis, adviser at the IMF’s Middle East and Central Asia Department, will arrive to Cairo on Friday in a visit that will last for two or three weeks.
According to the cabinet’s statement, the completion of negotiations is linked to the implementation of reforms that the IMF requested. The cabinet said that the current year’s budget presented the necessary structural reform measures. They include applying the value-added tax (VAT) law, completing the reform of the subsidiary system, approving the Civil Service Law, increasing pensions, rationalising government expenditure, increasing exports, and reducing imports. The reform programme aims to apply the required rationalisation measures and limit its effects on low-income people.
Daily News Egypt revealed last month that the government started loan talks with the IMF to borrow between $5-7bn.
The Egyptian parliament approved yesterday the new Civil Service Law to control the wage provisions in the state budget, and it is currently discussing the VAT draft law which was previously agreed upon with the IMF. The government also plans to cut electricity subsidiaries starting from this month.
Egypt suffers from a severe currency crisis due to the decline of the country’s basic foreign exchange resources, especially after the deterioration of the tourism sector and the collapse of the Egyptian pound in the informal market.