IMF to Soon Reach Technical Agreement on Bailout with Egypt... "Provisional $1.9 Billion Deal with Tunisia"

[Asia Economy Reporter Hyunseok Yoo] North African countries such as Egypt and Tunisia have been in discussions with the International Monetary Fund (IMF) regarding bailout funds.

According to foreign media on the 16th (local time), the IMF announced in a statement the day before that it plans to finalize a technical agreement on bailout funds with Egypt soon.

The statement said, "IMF staff and Egyptian officials had very productive talks in Washington during the IMF-World Bank joint annual meetings, making significant progress across all policy areas."

The IMF added that the discussions included monetary and exchange rate policies aimed at stabilizing inflation expectations, improving the transmission of monetary policy and the functioning of the foreign exchange market, and strengthening Egypt's external resilience.

The IMF emphasized, "This series of policies will enable Egypt to rebuild its foreign exchange reserves gradually and sustainably."

Egypt received $12 billion in funding during the political upheaval in 2016. In 2020, when the impact of the COVID-19 pandemic intensified, it received $8 billion in support, becoming the IMF's second-largest debtor after Argentina. Furthermore, as prices surged and capital outflows accelerated following Russia's invasion of Ukraine, Egypt requested assistance from the IMF in March. With external debt repayments amounting to $158 billion (approximately 227 trillion KRW), high dependence on grain imports, and the need to defend its national currency, Egypt is in urgent need of U.S. dollars.

During the 2016 bailout, Egypt devalued its national currency, the Egyptian pound, by half. Ahead of the current IMF funding request, Egypt again devalued the pound by 14%. It also restricted the issuance of trade letters of credit to prevent dollar outflows. As a result, shortages of imported daily necessities such as pharmaceuticals, medical supplies, and food have become a reality, and production sites are suffering significant damage due to a lack of imported raw materials.

Egypt's foreign exchange reserves decreased from about $41 billion in February to $33 billion in August. The inflation rate this year reached 15%, the highest in four years.

The IMF announced that it has tentatively agreed to provide Tunisia, the birthplace of the Arab Spring revolution and a country that has experienced chronic economic crises and political turmoil over the past decade, with $1.9 billion (approximately 2.74 trillion KRW) in bailout funds.

The bailout for Tunisia requires approval from the IMF board in December. The IMF explained, "The Tunisian government has committed to implementing a comprehensive economic reform program to qualify for the bailout. The reform program includes expanding taxation of the informal economy, increasing transparency in the public sector, abolishing wasteful price subsidies, and expanding social safety nets."

This content was produced with the assistance of AI translation services.