São Paulo – The International Monetary Fund (IMF) and Egypt have reached an agreement this Thursday by which the Fund will loan USD 12 billion to the Arab country in the next three years. The funds will be used to support the economic reform program that is being implemented by the Egyptian government and that aims to secure social services to the low-income population and bring down the government’s considerable debt.
In the 2015/2016 period, the Egyptian government’s debt was at 98% of its Gross Domestic Product (GDP) and it needs to bring it down to 88% of the GDP between 2018 and 2019.
In a statement, the Fund said that the agreement’s goal is to rationalize spending, reduce public and budget deficit and free up public funds for “high priority” spending, such as investments in infrastructure, health and education. By the agreements, social programs need to be secured. In some cases, the social protection network should be expanded, specifically healthcare to the poor, subsidies for infant milk and medicine for children and vocational training to young people.
In the statement, the Fund listed as ongoing economic projects the adoption of a value-added tax (VAT) and the rationalization of energy subsidies, which begun in 2014. These are measures that will be supported by the funds so that Egypt’s economy can resume growth, create job to women and young people and becomes more attractive to the private sector. The loan also aims at improving the functioning of foreign exchange markets.
“With the implementation of the government reform program, together with the help of Egypt’s friends, the Egyptian economy will return to its full potential. This will help achieve inclusive job-rich growth and raise living standards for the Egyptian people. We at the IMF are ready to partner with Egypt in this program”, said the statement of the head of the mission that visited Egypt from July 30 up to this Thursday, Chris Jarvis. Jarvis and the IMF staff went to Cairo due to a request made by the Egyptian government. The agreement is subject to approval by the IMF’s Executive Board.
*Translated by Sérgio Kakitani
