Prime Minister Mustafa Madbouly revealed today, Sunday, that the Egyptian government started discussions with the International Monetary Fund to obtain a new financial loan, while Egypt is facing a severe economic crisis and a debt-burdened payment schedule.
“Madbouly” said in a press conference: The government and the central bank applied for the loan in accordance with the program of the rapid financing tool and the program of credit preparedness agreement to develop proactive steps for a year if the crisis of the Coronavirus continues.
Madbouly explained that discussions with the fund will start over the next few days, but he did not clarify the value of potential financial support.
He continued: “This step is a precautionary measure, as no one until this moment can be certain about the end of this crisis, which imposes its great repercussions locally on sectors such as tourism and aviation, and may extend to foreign exchange receipts.”
For his part, “Tarek Amer” the Governor of the Central Bank of Egypt said: “The Monetary Fund is enthusiastic about the new program” , adding that the current cash reserves can protect Egypt from the economic shocks of the Coronavirus crisis for a year or two.
The head of research at Pharos Investment Bank Radwa Al-Swaify also suggested that “the new loan is often directed to support the budget deficit and the restructuring of some loans in light of the decline in dollar resources until they return again after the end of the Corona crisis.”
Radwa expects that the size of the new loan will range between “3 and 4 billion dollars for one year only.”
At the same time, Minister of Finance “Mohamed Moit” said: The talks with the fund are aimed at preserving the gains made by the economy during the last period and hedging against any repercussions of the spread of the Coronavirus.
The government said in a statement: “The request for support from the International Monetary Fund is important during these current exceptional circumstances and circumstances in order to continue to maintain the stability of the indicators of the Egyptian economy.”
Egypt had signed a loan with the International Monetary Fund worth $ 12 billion at the end of 2016, as part of a three-year economic program, which includes significant tax increases and the removal of subsidies.
The measures included floating the pound, which led to its collapse by more than 100%, and the occurrence of an unprecedented price hike wave with which the inflation rate jumped to more than 33% in 2017, before the government then released data showing a gradual decline until it reached 5.1% in February 2020, despite Continued complaints of high costs.
The loan also caused a reduction in energy and electricity subsidies, the application of value-added tax, and the layoffs of a large number of workers, and these measures caused difficulties for millions of Egyptians due to a surge in inflation that followed the liberalization of the currency exchange rate.