World - - Nov 15,2016
The International Monetary Fund (IMF) has approved a $12 billion loan to Egypt to help the country curb with its deep financial crisis. The amount will be allocated over a course of three years.
Initially, Egypt will be receiving $2.75 billion and the rest would be subject to its economic policies and their implementation. The deal, termed as Extended Fund Facility (EFF) was long-waited by Egypt as it is facing a high rate of unemployment and a budget deficit of 12% in GDP.
The country has been struggling to attract foreign investment since the Arab Spring in 2011, that caused a political turmoil in the country and former President Hosni Mubarak was overthrown from power. This has also led to a great decline in the tourism of the country that used to be a major source of income.
The country has faced a large number of protests due to unemployment and rise in prices of basic commodities. President Abdul Fattah al-Sisi’s government increased interest rates by 3% to 14.75% and even raised fuel prices. The government also floated its currency that reduced its value by almost 50% against the US dollar.
These moves led to such mass demonstrations in Cairo and other places that a big security operation had to be carried out to suppress it. Suchhard steps were justified by the government as being necessary to increase fiscal revenues to meet IMF’s requirements.
IMF managing director, Christine Lagarde, emphasized the need of economic reforms in the country to recover from foreign exchange shortages, poor exchange rates, large budget deficits and public debts along with the adverse effects of increased unemployment.
Egypt reached a deal of $4.8 billion with IMF in 2012 as well, but this loan was never finalized due to the political instability in the country at that point of time. Mr Sisi was elected as the President in May 2014 and since then his government had been largely dependent on Saudi Arabia for funds.