The International Monetary Fund said it would help Egypt plug the remaining financing gap for its economic program before the fund’s executive board approves a $12 billion loan deal with the Arab country. The government is targeting $21 billion over three years to revive growth and ease a crippling foreign-exchange shortage. In addition to the IMF loan, funds will come from the World Bank, the bond market, and bilateral accords.
“All IMF-supported programs have to be fully financed,” Chris Jarvis, the IMF’s mission chief for Egypt, said in an e-mailed response to questions. “In Egypt’s case, we would be looking for commitments of around $5 billion to $6 billion from bilateral creditors before the program is brought to the Board so that we can be sure that the program is fully financed. The IMF will be “working together with the Egyptian authorities in the coming weeks to secure this financing,” he said.
An acute shortage of U.S. dollars is taking its toll on Egypt’s economic activity and is restricting vital imports. PMI readings underline the view that economic performance was subdued from January to June as the indicator remained in contractionary territory during this period, with survey respondents often mentioning the dollar shortage as the main hurdle for business activity. That said, Egypt’s recent announcement that it was close to reaching an agreement with the IMF over a three-year conditional credit line sparked hopes that the deal could help ease the foreign currency shortage, restore confidence and oblige Egypt to implement its economic reform plans.