IMF to decide on $5.2 billion loan to Egypt
After reaching an agreement on June 5, the IMF will today disburse an emergency $5.2 billion stand-by arrangement (SBA) to Egypt.
While the IMF previously disbursed an emergency $2.7 billion loan to Egypt in May, today’s SBA is designed to reinforce Egypt’s macroeconomic stability. SBA loans are short-term instruments used to stabilise economies afflicted by balance-of-payment overdraws, foreign exchange shortages and current account deficits.
Egypt has a 40-year-long history of failed attempts to restructure and strengthen its economy with IMF assistance. But after four years of successfully implementing a 2016 loan package, Egypt has stabilised its foreign exchange imbalance, reformed its banking system, wiped out currency black markets and liberalised its economy.
Today’s loan will be used to stabilise the Central Bank of Egypt’s trade imbalance and shore up foreign reserves until the economy reopens after the COVID-19 outbreak subsides. The valuable breathing room afforded by the IMF in the midst of a global slowdown is a vote of confidence in Egypt’s ability to sustain recovery progress. If Cairo works to reduce high poverty rates and currency depreciation, there is a good chance that current IMF reforms will sufficiently stabilise the Egyptian economy.
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