The International Monetary Fund (IMF) has agreed on $3 billion in financial assistance for Egypt. The loan is a 12-month Stand-By Arrangement (SBA) to help the government's economic programme for 2011-12 - the global lender confirmed on Monday 06, 2011.
The IMF believes the financial package to Egypt will help finance the country’s recent economic problems following the massive street protests that ousted the government of President Hosni Mubarak from power in February 2011.
Like in Tunisia, analysts believe Egypt’s outflow of capital at the height of the revolt reached as much as $1 billion per day. The situation left the current ruling military council with a daunting task to stabilise the economy and restore social justice in the absence of international assistance.
In an article published in the Washington Post, June 05, 2011 Associated Press Samir Radwan, Egypt’s finance minister says his government - in the wake of the revolution - was faced with the dilemma of meeting growing demands while keeping the budget deficit “within reasonable limits.”
“This agreement is aimed at getting us out of the bottleneck,” Radwan told reporters, referring to Egypt’s current economic challenges. “It is a result of the increase in demands and the decline in resources.”
Egypt bailout aims to resettle economic and social justice
The loan agreement follows the government’s recent draft budget that shows deficits swallowing nearly 11 percent of the country’s gross domestic product.
Egypt’s finance ministry plans to boost social services, health care and other sectors to meet demands of the 80 million people in the country.
Officials said the loan was aimed at supporting Egypt’s “home-grown” economic roadmap and a better social justice system after years of corruption and looting under a regime accused of being out of touch with the country’s population. Economists say 40 percent of Egyptians lived below the World Bank’s poverty delineation of $2 per day under Mubarak’s rule.
Ms. Ratna Sahay, Deputy Director of the Middle East and Central Asia Department said in a statement: “Following a revolution and during a challenging period of political transition, the Egyptian authorities have put in place a home-grown economic program with the overarching objective of promoting social justice.”
Ms. Sahay added that the financial package is aimed at supporting economic recovery, generating jobs, and assisting low income households, while maintaining macroeconomic stability.
Egypt's draft budget for 2011-12 is aimed at allowing additional spending for job creation and poverty reduction, while containing the runaway deficit. Expenditure focuses on human capital, social investment as well as labour-intensive public works to encourage more job-intensive growth.
Terms of IMF loan agreement
The 12-month standby agreement covers fiscal year 2011-2012 at 1.5 percent annual interest rate. The loan awaiting approval by the IMF’s executive board in July will be repaid over five years, with first installments due three years and three months after disbursement.
John Lipksy, the IMF Acting Director said in a press statement following the staff-level agreement with the Egyptian authorities: "I welcome the commitment of the Egyptian authorities to lasting change and structural reform at this historic moment for the country. We are optimistic that the program’s objectives of promoting social justice, fostering recovery, and maintaining macroeconomic stability and generating jobs will bring positive results for the Egyptian people.
Sources:
- Associated Press, “Egypt secures $3 billion IMF standby loan agreement to help bridge projected deficit” The Washington Post, June 5, 2011
- Press Statement, “IMF Reaches Staff Level Agreement with Egypt on a US$3 Billion Stand-By Arrangement” International Monetary Fund, June 5, 2011
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