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IMF to consider Egypt's request for emergency loans on 11 May

Doaa A.Moneim , Wednesday 6 May 2020
FILE PHOTO: A man walks in front of a currency exchange bureau with an advertisement showing an imag
FILE PHOTO: A man walks in front of a currency exchange bureau with an advertisement showing an image of the U.S. dollar, with almost empty streets (Reuters)
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The executive board of the International Monetary Fund (IMF) announced on Wednesday that it will convene on 11 May to discuss Egypt’s request to get a financial package under the Rapid Financing Instrument (RFI), according to the board’s calendar published on the IMF website.

According to the IMF, the RFI provides rapid and low-access financial assistance to member countries facing an urgent need for a balance of payments, without the need to have a full-fledged program in place.

It can provide support to meet a broad range of urgent needs, including those arising from commodity price shocks, natural disasters, conflict and post-conflict situations, and emergencies resulting from fragility.

As a single, flexible mechanism with a broad coverage, the RFI replaced the IMF’s previous policy that covered Emergency Natural Disaster Assistance (ENDA) and Emergency Post-Conflict Assistance (EPCA), according the IMF.

In response to members’ large and urgent COVID-19-related financing needs, the IMF announced that access limits under the regular window of the RFI have been temporarily increased from 50 to 100 percent of quota per year, and from 100 to 150 percent of quota on a cumulative basis. Net of scheduled repurchases and higher access limits will apply for an initial six-month period, from 6 April 2020 to 5 October 2020, and may be extended by the IMF’s Executive Board.

Egypt is qualified to get a maximum of $2.78 billion (100 percent of its quota) on the back of the success of Egypt’s economic reform program, which was funded by the $12 billion Extended Fund Facility, according the IMF.

On 27 April, Egypt’s Prime Minister Mostafa Madbouly announced that Egypt filed a request with the IMF seeking financial support to back its efforts to curb the impacts of COVID-19, including the RFI loan and Stand-By Arrangement (SBA) loan.

According to the IMF, the meetings calendar is subject to change, and the agenda for each meeting is typically finalised the day before the meeting.

The Institute of International Finance (IIF) said in a report issued on Sunday that the IMF is expected to disburse 200 percent of Egypt’s quota to help contain COVID-19’s harsh impacts on the Egyptian economy

The RFI loan would facilitate increased health spending, a stronger social safety net, and assistance to SMEs to mitigate fallout from the crisis, and it would also provide a backstop against the decline in official reserves, according to the IIF report.

Official sources at the Central Bank of Egypt (CBE) told Ahram Online that the details of the two loans, including the time of disbursal, will be announced after Eid if the IMF approves it on 11 May.

On 26 April, Kristalina Georgieva, Managing Director of the IMF, announced that Egypt filed a request for two loans, adding that the emergency financing under the RFI will allow the government to address any immediate balance of payments needs and support the most affected sectors and vulnerable groups of people.

“My staff is also working with the Egyptian government to support its strong set of macroeconomic policies through an SBA. We fully support the government’s aim to safeguard the significant gains made under the successfully completed three-year Extended Fund Facility last year,” she said.

“This comprehensive package of financial support, if approved, would help strengthen confidence in the Egyptian economy, make further progress to protect the most vulnerable and provide the basis for a strong economic recovery. It would also help accelerate Egypt’s reform efforts aimed to support broad-based, job-rich and sustainable growth.”

On 11 November 2016, the IMF approved a three-year extended arrangement under the Extended Fund Facility for Egypt with a loan worth $12 billion, 422 percent of Egypt’s quota, to support the country’s economic reform program.

On 24 July 2019, the IMF announced the success of the program in achieving its objectives.

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