On Wednesday, Egypt finalised an expanded $8 billion agreement with the International Monetary Fund (IMF) after implementing significant economic measures.
The central bank devalued the Egyptian pound and raised interest rates by 600 basis points to stabilise the economy. In addition to the IMF deal, Egypt secured a $1.2 billion loan for environmental sustainability, totalling its IMF loans to over $9 billion, which was slightly lower than anticipated.
The Egyptian pound plummeted to over 50 pounds per dollar, surpassing previous records and prompting the country to adopt a more flexible exchange rate. Egypt intends to keep the currency flexible, relying on investments such as the $35 billion deal with the United Arab Emirates to stabilise inflows of hard currency.
Prolonged shortages of foreign money have caused payment delays, port backlogs, and difficulties for local firms. Remittances, the nation’s main source of foreign exchange, decreased as a result of the anticipated currency devaluation. Important sources of money, including tourism and Suez Canal income, are at risk because of external factors like the crises in Yemen and Gaza.
Structural reforms, including reducing state and military control over the economy, remain uncertain despite immediate monetary measures. The banking system faces challenges with a significant net foreign asset deficit.
