Egypt has reached an agreement with the International Monetary Fund to increase its bailout financing to $8 billion.
Prime Minister Moustafa Madbouly made this announcement on Wednesday.
Egypt has been negotiating with the IMF for months to enhance a $3 billion rescue credit agreed upon in 2022.
Madbouly stated that the new agreement will allow the government to acquire loans from other financial organizations, including the World Bank.
The news came just hours after Egypt’s Central Bank hiked the primary interest rate and floated the currency.
The measures have been among the key demands of the IMF. They are meant to combat inflationary waves and attract foreign investment as the country experiences a staggering shortage of foreign currency.
Following the currency announcement, the pound began floating and within hours lost more than 60% of its value against the dollar. By early afternoon, commercial banks were trading the U.S. currency at more than 50 pounds for $1, up from about 31 pounds for the dollar.
The central bank raised the key interest rate by 600 basis points, to 27.75%. The bank also hiked the overnight deposit and lending rates by 600 basis points, to 27.25% and 28.25%, respectively, according to a statement.
Years of government austerity, the coronavirus pandemic, the aftermath of the Ukraine war, and, most recently, the Israel-Hamas conflict in Gaza have all had a negative impact on Egypt’s economy.
The war in Ukraine, which shook the global economy, hit cash-strapped Egypt, which is financially vulnerable — the world’s largest wheat importer and relies on other countries to feed its population of more than 104 million people.
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