The IMF reached a staff-level agreement with Egypt for a 46-month Extended Fund Facility (EFF) Arrangement of $3 billion on 27 October. Egypt has also requested an additional $1 billion from the IMF’s Resilience and Sustainability Trust. While the EFF programme notes that the agreement’s goals are aimed at safeguarding macroeconomic stability and debt sustainability, long-term solutions to the country’s debt problems are nowhere to be found. The agreement is still pending the IMF board’s approval, which will be discussed at the board’s meeting on 16 December, according to its official calendar.
Since 2016, Egypt has had to repeatedly return to the IMF for financial support, raising questions about the effectiveness of the Fund’s policy prescriptions. A 2019 report by Oxfam International found that IMF programmes in the country have “contributed to a decrease in social spending and an increase in poverty” (see Observer Winter 2019, Summer 2018; At Issue February 2017).
Since President Abdel Fattah El-Sisi took office in 2014, Egypt’s external debt has rapidly increased – especially given the government’s reliance on heavy borrowing. In June, its external debt stood at $155 billion, with $52 billion owed to multilateral institutions, of which 44.7 per cent is owed to the IMF, according to the Central Bank of Egypt.
Tim Jones, of UK-based civil society organisation Debt Justice, said, “The IMF loan will just be used to pay previous lenders, while keeping Egypt trapped in a debt crisis. The IMF is making the same mistakes as in the 1980s and 1990s, bailing out reckless lenders such as private bondholders. This ensures the debt crisis will continue, while incentivising lenders to keep acting recklessly in the future.”