Egypt secures $5.2b IMF loan to tackle virus fallout

The International Monetary Fund on Friday approved Egypt’s request for a $5.2 billion loan as the country’s economy reels from the financial fallout of the coronavirus pandemic.

The one-year arrangement, which comes on top of a separate $2.77 billion emergency financing announced last month, aims to boost Egypt’s social spending, spur job creation and advance structural reforms to “put Egypt on a strong footing for sustained recovery,” the IMF said in a statement.

Egypt had been one of the fastest-growing emerging markets in the world before the pandemic. Now, the IMF warned, disruptions “have worsened the economic outlook and reshuffled policy priorities.”

There was no immediate comment from the Egyptian government on the loan’s approval.

The Arab world’s most populous country is struggling to cope with a collapse of critical sources of income, including tourism revenue, remittances from Egyptian workers abroad, shipping fees from the Suez Canal and gas and oil revenues.

Egypt only just emerged from a three-year economic overhaul after securing a $12 billion IMF loan in late 2016. The government’s significant reforms included floating the currency, slashing key subsidies and imposing a value-added tax.

The austerity measures won President Abdel Fattah el-Sissi praise from Cairo’s Western backers and bankers, and helped attract foreign investment. But the overhaul also dramatically hiked prices for everything from electricity to drinking water, squeezing the poor and middle class.

Before the pandemic threw millions of casual laborers out of work, one in three Egyptians was already living in poverty, according to government figures.

During the pandemic, the government has handed out 500 Egyptian pounds ($31) a month to informal workers in need. But that seemingly hasn’t solved the economic distress of millions. The government’s statistics agency reported recently that about half of all Egyptian families had been forced to borrow money because of the economic shutdown. Over 73% of citizens said their income had declined.

To fend off further financial strain, the government has resisted a harsh lockdown, instead enacting a nighttime curfew, shutting down schools, mosques, gyms and clubs, and urging citizens to wear masks and take other precautions against the virus.

Starting next week, the government plans to gradually reopen society even as it reports over 1,000 new infections and close to 100 deaths a day. Restaurants, coffee shops, clubs and theaters will resume operations at 25% capacity, while mosques and churches will welcome worshippers after a three-month suspension. International flights will resume for tourism to destinations less hard-hit by the virus.

Separately, the International Monetary Fund said on Friday it will provide Myanmar with $356.5 million in emergency funding, as the southeast Asian country battles an economic slump due to the coronavirus pandemic.

“The Myanmar economy is being impacted by the outbreak of COVID-19 through a sharp decline in tourism and remittances and supply chain disruptions,” Mitsuhiro Furusawa, IMF deputy managing director, said in a statement.

The fund “will help address Myanmar’s urgent financing needs related to COVID-19 shock, and catalyze support from development partners.”

The money comes from two programs put into place to ensure rapid disbursement of funding without the need for lengthy negotiations over a reform programme by Myanmar.

Some $118.8 million will come from the Rapid Credit Facility and the remaining $237.7 million will draw from the Rapid Financing Instrument.

It was the 72th request for emergency financial assistance approved by the fund’s executive board to address the impact of the pandemic.

The funding will help Myanmar’s government as it boosts health spending, expands food distribution and cash transfer programs to the most vulnerable, as well as businesses and farmers, the IMF said.

Meanwhile, the International Monetary Fund Managing Director Kristalina Georgieva said on Friday that the global economic crisis spurred by the coronavirus could ultimately test the Fund’s $1 trillion in total resources, “but we’re not there yet.”

Georgieva told a Reuters Newsmaker webcast event that it was now clear that an economic recovery would have to get underway without a medical breakthrough and the virus’ presence still widespread throughout the world. IMF member countries were standing by to provide more support to the Fund if necessary, she said.

Reuters