The International Monetary Fund has agreed to more than double a bailout package for Egypt, which is going through its worst economic crisis in decades, exacerbated by war in the neighboring Gaza Strip and in Ukraine.
The fund now plans to provide Egypt $8 billion, up from an initial $3 billion announced in October 2022.
The I.M.F.’s mission chief to Egypt, Ivanna Vladkova Hollar, noted at a news conference that the already-struggling Egyptian economy had been further hurt by the conflict between Israel and Hamas, which has cut into the country’s vital tourism trade.
At the same time, revenue from the Suez Canal dropped by half after Houthi militants, who say they are acting in solidarity with Palestinians in Gaza, began attacking cargo ships using Red Sea shipping routes.
Prime Minister Mostafa Madbouly of Egypt said that the deal would enable the government to secure an additional $1.2 billion, above the $8 billion, from the I.M.F.’s environmental suitability fund and would encourage development partners like the World Bank and the European Union to also give Egypt more loans to help it reach financial stability.
Last week, Egypt secured a deal worth $35 billion with the United Arab Emirates to develop parts of its Mediterranean coast. Egyptian officials celebrated it as the largest foreign direct investment in Egypt’s history.
Hours before the I.M.F. deal was announced, in an attempt to rein in soaring inflation, Egypt’s Central Bank devalued the currency by more than 35 percent — it was the fourth devaluation in two years — and raised interest rates by 600 basis points.
Shops in old Islamic Cairo in March. In an attempt to rein in soaring inflation, Egypt’s Central Bank devalued the currency by more than 35 percent.Credit…Fatma Fahmy for The New York Times
Mr. Madbouly said his government and the I.M.F. had reached consensus on the targets of Egypt’s structural reform plan.
“The aim is to raise foreign currency reserves, lower the debt burden, guarantee the flow of foreign direct investments and work towards high growth rates for the Egyptian economy,” he said.
The government and the monetary fund are committed to social protection measures for vulnerable people who will be affected by the reform plans, Mr. Madbouly said.
Over the past 18 months, a severe foreign currency shortage in Egypt, which overwhelmingly relies on imports, has sent prices — and anxiety about the future — off the charts. The cost of some basic food items quadrupled, debt burden reached an all-time high, and the currency lost a huge portion of its value, decimating the purchasing power of people’s incomes and the value of their life savings.
The Central Bank Governor, Hassan Abdalla, said the government’s medium-term plan aimed to bring down inflation, which hit a record-high of nearly 40 percent last summer, to a single digit.
Before the I.M.F. deal, growing economic pressure had forced the government to shift tactics, including freezing some…