CAIRO (Reuters) - Egypt has reached a staff-level agreement with the International Monetary Fund for an installment of about $2 billion more from a three-year, $12 billion loan program, the IMF said on Friday.
The payment, still subject to IMF executive board approval, will bring total disbursements under the program to about $6 billion. Egypt is pushing through ambitious economic reforms under the loan deal.
As part of a second review, the IMF said broad reforms, which included a floatation of the pound currency, were beginning to pay off in terms of “macroeconmic stabilization and return of confidence.”
“While the reform process has required sacrifices in the short term, seizing the current moment of opportunity to transform Egypt into a dynamic, modern, and fast-growing economy will improve the living standards and increase prosperity,” it said in a statement.
The IMF noted growth for the 2016/17 fiscal period had picked up to 4.2 percent compared to a forecast 3.5 percent, the current account deficit in dollar terms had narrowed and portfolio investments and foreign direct investment had increased.
Egypt floated its currency a year ago, and the pound has roughly halved in value. As the currency dropped, inflation surged to record highs over 30 percent, though consumer prices have dipped in the last three months.
The economic outlook is key for Egyptian President Abdel Fattah al-Sisi who must balance IMF-austerity reforms to fix Egypt’s economy while limiting the fallout on poorer Egyptians as he prepares for a possible re-election bid next year.
Reporting by Patrick Markey; Editing by Alison Williams/William Maclean