Egypt secures $4.8 billion IMF loan


I like this.


Mr. Guliyev is specialized in international relations / business, global governance and investments areas. He is committed to be successful.

(By EM) Egypt and the International Monetary Fund (IMF) reached an agreement on a 22-month Stand-By Arrangement

The agreement was reached at staff level and is expected to be submitted to the IMF’s Executive Board for approval in a few weeks, the Fund said in a statement at the end of a staff mission in Cairo.

Speculation that a deal will be concluded soon has helped shore up support for Egypt’s economy, which has taken a hit after the Arab Spring and has also been affected by the global slowdown.

“The policies contained in the authorities’ program will help address Egypt’s pressing economic and social challenges, and reduce vulnerabilities,” Andreas Bauer, division chief in the IMF’s Middle East and Central Asia Department, said in a statement.

An agreement was reached on the thorny issue of energy subsidies, with the Egyptian government planning to reform them and target them to “vulnerable groups,” Bauer said.

The authorities will raise revenue by reforming the tax system. The progressivity of income taxation will be increased and the general sales tax will be broadened to become a value added tax, under reforms to be carried out under the programme.

The money generated will boost investment in infrastructure and social spending and will also contribute to gradually cut the budget deficit to 8.5% of gross domestic product (GDP) in 2013-2014 from the current level of nearly 11%, Bauer said.

“The envisaged deficit reduction will help alleviate the public debt burden and free up financing to support social spending and private sector growth,” he said.

Egypt will also take measures to strengthen the management of public finances and increase transparency and accountability of the public sector, the IMF said.

“Monetary and exchange rate policies will be geared toward ensuring declining inflation over the medium term, enhancing Egypt’s international competitiveness to stimulate trade and attract capital inflows, and increasing international reserves to protect against external shocks,” it added.

Neil Shearing, chief emerging markets economist at Capital Economics, said that the deal means the risk of a balance of payments crisis in the country was greatly reduced but that more clarity was needed on the issue of currency devaluation.

“The pound currently looks significantly overvalued and we estimate that it might need to fall by around 20% in order to restore competitiveness,” Shearing said.

Including the IMF funds, Egypt benefits from $14.5 billion in financing on favorable terms from many bilateral and multilateral partners, the Fund said.

Tags: , ,

Post a Comment

Your email is never published nor shared. Required fields are marked *


Subscribe without commenting