Egypt secures IMF deal after pound's plunge

Egypt secured on Wednesday an expanded $8 billion deal with the International Monetary Fund (IMF), hours after the central bank unshackled its currency and delivered a 600 basis points rate hike in a push stabilise the economy.

Additionally, Egypt secured another $1.2 billion loan for environmental sustainability, bringing its total loan from the IMF to more than $9 billion, the government and Fund officials said. This was towards the lower end of what some analysts had expected.

The currency weakened to beyond 50 Egyptian pounds to the dollar – far beyond previous records – from about 30.85 pounds, a level Egypt has for months tried to defend. It closed at 49.4 to the dollar.

A more flexible exchange rate had been a key demand of the IMF, which had been in talks with officials to expand the Fund’s current, $3 billion support programme with Egypt.

Egypt has in the past said it would shift to a more flexible exchange rate, only to return to closely managing the currency whenever the pound weakened.

This time, it may be betting that hard currency inflows from investment projects, including a $35 billion investment deal signed in late February with the United Arab Emirates, will prevent a freefall.

Published in The Express Tribune, March 7^th, 2024.

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