Egypt reaches deal with IMF for $12 bn loan to mend ailing economy

The International Monetary Fund (IMF) has reached an initial agreement with Egypt for a $12 billion loan over three years, the fund said on Thursday.

The Egyptian government hopes the loan will provide a lifeline amid a dollar shortage, dwindling foreign reserves and an economy battered by years of unrest.

The agreement, which will have to be ratified by the IMF and Egyptian authorities, will require Cairo to undertake economic reforms.

“Egypt is a strong country with great potential but it has some problems that need to be fixed urgently,” IMF said in a statement, adding that planned government measures include tax increases and cuts in energy subsidies.

IMF delegation head Chris Jarvis said in a press conference that the fund was looking to Egypt’s parliament to pass a value added tax law.

Analysts have said the IMF also pushed for a more flexible exchange rate for the Egyptian pound, which the government has been propping up amid capital controls.

The shortage has affected imports and created a flourishing black market trade that the government fought unsuccessfully.

Jarvis said the goal was to have no foreign currency shortage and to create a “balance between supply and demand.”

President Abdel Fattah al-Sisi has been preparing public opinion for the economic reform measures, including further subsidy cuts.

Although the loan is spread out over three years, the IMF will be looking for a quick implementation of the reform measures.

Egypt said earlier this week it would raise electricity prices by a least a quarter, part of plans to eliminate the subsidies altogether by 2019.

The north African nation’s economy has been struggling since the 2011 uprising that overthrew longtime ruler Hosni Mubarak, with high inflation, foreign currency shortages, and lack of tourism and investment.