The International Monetary Fund signed an initial agreement with Egypt recently to loan it $12 billion over three years, in hopes the funds will help fix an ailing economy in the Arab world’s most populous country. The IMF said the loan, which is subject to approval by its executive board, comes in support of a government reform program that aims to alleviate the demand for black market dollar trading, bring down the budget deficit and government debt, as well as raise growth and create jobs.
“Egypt is a strong country with great potential but it has some problems that need to be fixed urgently,” it said in a statement, adding that planned government measures include tax increases and cuts in energy subsidies. Egypt earlier announced it would raise electricity prices by a least a quarter, a jump forward in its plans to eliminate the subsidies altogether by 2019.
The government’s economic program states it will focus efforts on alleviating any effects on the poor, who will in all likelihood feel the pain on the short-term that could spark trouble on the streets. The program also says it aims to ensure that any economic upturn will bring benefits to the entire population of 91 million — and not just elite slices of society, as has been the case in the past.
The subsidy cuts and reforms required by an IMF loan have led successive Egyptian leaders to balk, fearing that austerity and tax hikes could stoke further unrest among the country’s impoverished masses before any benefits could be felt.