The International Monetary Fund (IMF) said on Wednesday it would increase its current loan programme with Egypt by $5 billion, as the central bank let the pound plummet and said it would allow the currency to trade freely.
The new agreement is an expansion of the $3 billion, 46-month Extended Fund Facility that the IMF struck with Egypt in December 2022, a key plank of which was meant to be a shift to a more flexible exchange rate system.
The programme stalled when Egypt reverted to keeping its pound at a tightly managed rate over the past year, and amidvdelays to an ambitious programme to divest state assets and boost the role of the private sector.
Egypt is also seeking a separate loan from the IMF’s Resilience and Sustainability Facility which promotes climate transition financing. Egyptian Prime Minister Mostafa Madbouly said that loan would be $1.2 billion, but the IMF’s Egypt mission chief, Ivana Vladkova Hollar, said discussions about that request would continue separately.
Vladkova Hollar told reporters that the IMF was not seeking a “specific cheapening” of the pound, but to “move sustainably” to a unified market determined exchange rate. She added that the central bank’s move on Wednesday was a strong step towards that goal.
“So, under this framework, you would observe not just devaluations, but you would observe two-way movements in the exchange rate as it moves in response to economic conditions,” she said.
The IMF said in a statement that it had reached agreement with Egypt on the policies needed to complete the delayed first and second reviews under the programme, which can unlock disbursements of funding subject to approval by the fund’s executive board.
