Egypt wins approval for $12bn loan from the IMF

• 12 November 2016
 
• From the sectionMiddle East

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Image copyrightGETTY IMAGES

Image captionLast week Egypt floated its currency in a move aimed at strengthening confidence in the economy

by Nasra Ismail, Isabelle Roussel, and Biodun Iginla, BBC News, Cairo/Geneva

The International Monetary Fund (IMF) has approved a three-year $12bn (€11bn) loan for Egypt to help the country out of its deep economic crisis.

Egypt will receive $2.75bn immediately, with the rest subject to its economic performance and further reforms.

IMF Managing Director Christine Lagarde said the bailout would "address longstanding challenges".

Egypt's President Abdul Fattah al-Sisi is facing high unemployment and a budget deficit of 12% of GDP.

The country has struggled to attract foreign investment since the political turmoil in 2011 and the so-called Arab Spring, which saw former president Hosni Mubarak overthrown.

Tourism - traditionally a leading source of income for Egypt - has declined sharply over the past five years.

Last week Egypt floated its currency in a move that reduced its value by almost 50% against the dollar in an attempt to strengthen confidence in the economy.

• Egypt allows its currency to float freely

• Can Egypt's tourism recover?

The government also increased interest rates by three percentage points to 14.75%, and raised the price of basic commodities and fuel.

The moves led to widespread criticism of the president and a drop in his popularity. A big security operation was put in place in Cairo to pre-empt mass demonstrations that had been expected on Friday.

Image copyrightREUTERS

Image captionThere was heavy security in Cairo on Friday to prevent any unrest over the austerity moves

Ms Lagarde said the latest "home-grown economic plan" was intended to tackle the country's large budget deficit, low growth and high unemployment rate.

She said that further reforms, such as reductions in fuel subsidies and legislation to reduce Egypt's public sector wage bill, were necessary for the country to move forward.

"Resolute implementation of the policy package is essential to restore investor confidence," Ms Lagarde said.

In 2013, Egypt's first democratically elected president, Mohammed Morsi, was ousted by the military, led by Gen Sisi, after only one year in power.

Mr Sisi was later elected president in May 2014.

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