Egypt's economy trapped in vicious cycle of IMF debts

Speaking on Egyptian television channel CBC on May 17, Chris Jarvis, the International Monetary Fund (IMF) Mission Chief for Egypt, said Cairo is expected to receive $1.25 billion within a few weeks as the second tranche of an IMF loan granted in 2016.

arvis said the Egyptian government should bring inflation down, stressing the IMF's optimism with Egypt's efforts to completely lift subsidies on energy products within three years.

Jarvis had announced an agreement with the Egyptian government Aug. 11, 2016, allowing Cairo to receive a three-year Extended Fund Facility (EFF) in the amount of $12 billion to support the government's economic reform program.

In order to obtain the loan, Egypt was forced to adhere to an economic program, the first step of which was to float the exchange rate and devalue the pound against the US dollar while lifting subsidies on petroleum fuels. These decisions were adopted Nov. 3. On Nov. 11, the Central Bank of Egypt received from the IMF $2.75 billion, representing the first tranche of the $12 billion IMF loan to Egypt.

These decisions led to a high inflation rate, which reached 31.5% in April. The IMF loan was not the only loan Egypt sought. The country also concluded a $3 billion loan agreement with the World Bank, and the Egyptian government received the second tranche of that loan in March 2017.