(Bloomberg) -- The International Monetary Fund approved $2.77 billion in emergency funding for Egypt as the Arab world’s most populous nation grapples with the economic fallout of the coronavirus pandemic.
The borrowing under the lender’s Rapid Financing Instrument comes after Egypt last month requested it and a stand-by agreement to help cover any current-account gaps.
“Egypt achieved a remarkable turnaround prior to the COVID-19 shock, carrying out a successful economic reform program supported by the IMF’s Extended Fund Facility (EFF) to correct large external and domestic imbalances. The pandemic and global shock pose an immediate and severe economic disruption that could negatively impact Egypt’s hard-won macroeconomic stability if not addressed,” the Washington-based fund said Monday in a statement.
The North African country last year wrapped up a sweeping IMF-backed reform program that included a $12 billion loan and rekindled investor interest after the 2011 uprising that ousted President Hosni Mubarak.
“The COVID-19 pandemic has drastically disrupted people’s lives, livelihoods, and economic conditions in Egypt. The global shock has resulted in a tourism standstill, significant capital flight, and a slowdown in remittances, resulting in an urgent balance of payments need,” the IMF said.
The RFI “will help limit the decline in international reserves and provide financing to the budget for targeted and temporary spending, aimed at containing and mitigating the economic impact of the pandemic.”
The country needs to bridge a funding gap of around $10 billion by end of 2020, according to estimates from investment banks EFG Hermes and Goldman Sachs Group Inc (NYSE:GS).
Egypt’s foreign reserves have declined by about $8.5 billion to $37 billion over the past two months. They had reached an all-time high prior to the outbreak. Foreign holdings in local securities have fallen by almost half and the central bank has used some of its firepower to partially cover outflows via a mechanism that guarantees investors can withdraw their profits in hard currency.
Read More: Egypt Foreign Reserves Fall for Second Month as Virus Takes Toll
“Additional expeditious support from multilateral and bilateral creditors will be needed to close the remaining balance of payments gap, ease the adjustment burden, and preserve Egypt’s hard-won macroeconomic stability,” said the IMF.
(Updates to add fund comment in third paragraph)
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