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The International Monetary Fund has agreed to more than double a bailout package for Egypt, which is going through its worst economic crisis in decades, exacerbated by war in the neighboring Gaza Strip and in Ukraine.<\/p>\n
The fund now plans to provide Egypt $8 billion, up from an initial $3 billion<\/a> announced in October 2022.<\/p>\n The I.M.F.\u2019s mission chief to Egypt, Ivanna Vladkova Hollar, noted at a news conference that the already-struggling Egyptian economy had been further hurt by the conflict between Israel and Hamas, which has cut into the country\u2019s vital tourism trade.<\/p>\n At the same time, revenue from the Suez Canal dropped by half after Houthi militants, who say they are acting in solidarity with Palestinians in Gaza, began attacking cargo ships using Red Sea shipping routes<\/a>. <\/p>\n Prime Minister Mostafa Madbouly of Egypt said that the deal would enable the government to secure an additional $1.2 billion, above the $8 billion, from the I.M.F.\u2019s environmental suitability fund and would encourage development partners like the World Bank and the European Union to also give Egypt more loans to help it reach financial stability.<\/p>\n Last week, Egypt secured a deal worth $35 billion with the United Arab Emirates to develop parts of its Mediterranean coast. Egyptian officials celebrated it as the largest foreign direct investment in Egypt\u2019s history.<\/p>\n Hours before the I.M.F. deal was announced, in an attempt to rein in soaring inflation, Egypt\u2019s Central Bank devalued the currency by more than 35 percent \u2014 it was the fourth devaluation in two years \u2014 and raised interest rates by 600 basis points. <\/p>\n Mr. Madbouly said his government and the I.M.F. had reached consensus on the targets of Egypt\u2019s structural reform plan.<\/p>\n \u201cThe aim is to raise foreign currency reserves, lower the debt burden, guarantee the flow of foreign direct investments and work towards high growth rates for the Egyptian economy,\u201d he said. <\/p>\n The government and the monetary fund are committed to social protection measures for vulnerable people who will be affected by the reform plans, Mr. Madbouly said.<\/p>\n Over the past 18 months, a severe foreign currency shortage in Egypt, which overwhelmingly relies on imports, has sent prices \u2014 and anxiety about the future \u2014 off the charts. The cost of some basic food items quadrupled, debt burden reached an all-time high, and the currency lost a huge portion of its value, decimating the purchasing power of people\u2019s incomes and the value of their life savings. <\/p>\n The Central Bank Governor, Hassan Abdalla, said the government\u2019s medium-term plan aimed to bring down inflation, which hit a record-high of nearly 40 percent last summer, to a single digit.<\/p>\n Before the I.M.F. deal, growing economic pressure had forced the government to shift tactics, including freezing some costly megaprojects ordered up by President Abdel Fattah el-Sisi, including a lavish new capital<\/a> in the desert.<\/p>\n Additional pressure came from the I.M.F., which refused to hand over much of the initial loan until Egypt made good on some economic policy conditions. Among them was encouraging private-sector growth by eliminating the competitive advantages enjoyed by Egypt\u2019s military-owned businesses.<\/p>\n Over the past decade, Egypt\u2019s economy has been struggling for stability. Many observers say mismanagement, including overspending on megaprojects and the longstanding overreliance on imports, left Egypt vulnerable to successive external shocks. Apart from the war in Gaza, there was the coronavirus pandemic and the war in Ukraine, which affected both tourism and essential wheat imports.<\/p>\n