Egypt reached a staff-level agreement with the International Monetary Fund (IMF) on Friday securing a $5.2 billion standby loan, Al Ahram reports.
According to Bloomberg, the loan is valid for one year and is aimed at covering Egypt’s “funding gap” and is reportedly aimed at easing the economic recession brought about by the COVID-19 pandemic.
The loan and the economic policies it is conditional upon will support “the authorities’ efforts to maintain macroeconomic stability amid the COVID-19 shock while continuing to advance key structural reforms,” Uma Ramakrishnan, the head of the IMF’s mission to Egypt, said in a statement.
The loan is also aimed at maintaining economic stability in Egypt, whose economic indicators saw a marked improvement as a result of the country’s 2016 agreement with the IMF, securing a three-year $12 billion loan. The deal also saw Egypt enact a number of economic reforms, such as slashing subsidies and free floating the Egyptian pound.
“This will safeguard the gains achieved by Egypt over the past three years and put the country on strong footing for sustained recovery as well as higher and more inclusive growth and job creation over the medium term,” the statement read. “It will also aim to support health and social spending, improve fiscal transparency, and advance further reforms to spur private-sector-led growth and job creation,”
The agreement hasn’t been finalized as it has yet to be approved by the IMF’s Executive Board, which is reportedly expected to issue its decision in the coming weeks.
Last month, Egypt secured another loan from the IMF to the tune of $2.772 billion under the Rapid Financing Instrument (RFI), which was earmarked for healthcare and social security spending, as well as bailing out the industries and sectors that have been hit the hardest by economic fallout.
Egypt is seeking an additional $4 billion from other international financial institutions, according to Bloomberg. If obtained, these funds will fill Egypt’s funding gap for 2020, estimated at $10 billion dollars.