Egypt, IMF Reach $12 Billion Loan Agreement

imf-loansEgypt and the International Monetary Fund (IMF) have reached an agreement for the three-year $12 billion loan needed by Cairo to support its reform program.

The head of the IMF delegation Chris Jarvis said the country has a “great potential but it has some problems that need to be fixed urgently” with reference to tax reforms, flexible exchange rate and subsidy cuts. Governor of the Central Bank Tarek Amer said the loan would boost confidence in government’s efforts.

Jarvis acknowledged the efforts of the Egyptian government in adhering to the conditions of the loan as he noted that the central bank is progressing on exchange rate policy, the Value-Added Tax (VAT) to be introduced is being discussed in parliament and the reform of the fuel subsidy program “continues to unfold.” Experts say the Egyptian pound has to be devalued again by another 10% for the reforms to be effective. The latest devaluation dates back to March.

Jarvis said a “quick implementation” of the measures to restore economic stability is needed.

The agreement needs to be ratified by the IMF executive board and the Egyptian parliament

President Sisi is wary of the sensitivity of the reforms because the financial and economic reforms that the coalition government, led by Mohammed Morsi, embarked on led to a popular uprising which ended with a coup d’état.

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