The Executive Board of the International Monetary Fund (IMF) approved Egypt’s request for an emergency financial assistance of $2.772 billion (100 percent of Egypt’s quota) under the Rapid Financing Instrument (RFI) to meet the urgent needs of the balance of payments owing to the outbreak of the COVID-19 pandemic.
The IMF announced that the purchase under the RFI entails exceptional access due to outstanding credit under the previous extended arrangement under the Extended Fund Facility.
According the IMF statement, Egypt achieved a remarkable turnaround prior to the COVID-19 shock, carrying out a successful economic reform programme supported by the IMF’s Extended Fund Facility to correct large external and domestic imbalances.
The pandemic and global shock posed an immediate and severe economic disruption that could negatively impact Egypt’s hard-won macroeconomic stability if not addressed. The authorities have launched a comprehensive package to contain the economic impact of the COVID-19 shock. The RFI will help alleviate some of the most pressing financing needs, including spending on health, social protection, and supporting the hard-hit sectors and vulnerable groups, according to the statement.
The IMF announced it remains closely engaged with the Egyptian government and the Central Bank of Egypt and stands ready to provide policy advice and further support as needed.
Following the Executive Board discussion, Geoffrey Okamoto, the IMF's first deputy managing director and acting chair, said the COVID-19 pandemic has drastically disrupted people’s lives, livelihoods, and economic conditions in Egypt.
The global shock has resulted in a tourism standstill, significant capital flight, and a slowdown in remittances, he added.
"Egypt’s government has responded to the crisis with a comprehensive package aimed at tackling the health emergency and supporting economic activity. The authorities acted swiftly to allocate resources to the health sector, provide targeted support to the most severely impacted sectors, and expand social safety net programmes to protect the most vulnerable. Similarly, the Central Bank of Egypt adopted a broad set of measures, including lowering the policy rate and postponing repayments of existing credit facilities," said Okamoto.
He added that emergency support under the RFI will help limit the decline in international reserves and provide financing to the budget for targeted and temporary spending, aimed at containing and mitigating the economic impact of the pandemic.
The authorities are committed to full transparency and accountability on crisis-related spending including through publishing information on procurement plans and awarded contracts, as well as ex-post audits of such spending, he added.
"Additional expeditious support from multilateral and bilateral creditors will be needed to close the remaining balance of payments gap, ease the adjustment burden, and preserve Egypt’s hard-won macroeconomic stability," he said
"As the crisis abates, measures to lower the debt level would need to resume along with continued implementation of structural reforms to increase the role of the private sector to achieve higher and inclusive private sector-led growth and job creation, unlocking Egypt’s growth potential and entrenching resilience," according to Okamoto.
On 26 April Prime Minister Mostafa Madbouly announced that Egypt has filed a request to receive two loans under the RFI and the Stand-By Agreement (SBA).
The IMF is expected to approve a disbursal of $200 million of Egypt’s quota under the SBA.