Central bank of Egypt has announced that the country, in search of cash to support a faltering economy, has secured funding of two billion dollars (1.8 billion euros) from a consortium of international banks. Meanwhile, the Finance Ministry issued sovereign bonds, worth four billion, listed on the Irish Stock Exchange. Part of these obligations was used to secure the loan of two billion dollars obtained by the Central Bank.
These announcements come at the eve of a crucial decision by the International Monetary Fund (IMF) on a loan of 12 billion dollars (10.8 billion euros) requested by Cairo to shore up a battered economy since the revolution in 2011 against former President Hosni Mubarak. To grant this lifeline to Egypt, the most populous country in the Arab world, the IMF had asked Cairo to secure funding of six billion dollars (5.5 billion euros) additional to other creditors.
Egypt saw its dollar reserves melt in recent years, to 19.6 billion in September, 50% less than in 2011. Last week, the Central Bank decided to float the Egyptian pound, resulting in de facto a sharp devaluation of almost 50% of the currency against the dollar.
The loan of two billion dollars negotiated with international banks, whose name was not disclosed, will strengthen liquidity and currency reserves of the Central Bank, welcomed the institution in a statement. Egypt shall remit that amount in a year and has guaranteed the loan with some of the sovereign bonds issued in dollars (…) to the Irish Stock Exchange, said the institution.
The loan to the Central Bank reflects the increased confidence of international financial institutions in the capacity of the Egyptian economy, especially after the major structural reforms of the government assures the ministry.
In return for the loan hoped the IMF, the Egyptian government has launched a painful reform program, which provides in particular for a drastic reduction of government subsidies – which account for 7.9% of spending Etat– allocated notably fuel.
This resulted in a price increase of fuel at the pump: 47% for the liter of gasoline 80 octane and 35% for the super 92. The Egyptians are concerned about the soaring prices of many commodities.