Egypt receives $2.77 billion IMF credit to address coronavirus
The most populous country in the Arab world is once again facing the abyss of bankruptcy. The expansion of COVID-19 has had a strong impact on the Egyptian economy, which is closely linked to tourism. Confinements and border closures have come at the worst possible time, when tourist activity was beginning to take off after several years of losing visitors due to fear of terrorist attacks. The authorities were therefore forced to ask the International Monetary Fund (IMF) for financial assistance again last month. The agency has announced that it will grant a $ 2,770 million credit this Monday, according to a press release sent to the media.
In order to address the health crisis, the authorities have expanded spending on health and social protection, but have found no funding to carry out these measures. "The COVID-19 pandemic has hit Egypt very hard. 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", said Geoffrey Okamoto, a member of the IMF executive board, in a statement included in the agency's press release. “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. As the crisis abates, measures to lower the debt level would need to resume along with continued implementation of structural reforms to boost growth," said Mr Okamoto.
Although the country's economy has been hit hard by the pandemic, the country will manage to avoid recession, according to the latest forecasts of the European Bank for Reconstruction and Development (EBRD) published on Wednesday. The Regional Economic Outlook report forecasts growth of 0.5% in 2020 and the economy is expected to rebound by 5.2% in 2021. The entity's document states that the most affected sectors in Egypt are tourism, imports and foreign direct investment.
Major public construction projects and the boom in the telecommunications sector have been the main contributors to growth so far. The southern and eastern Mediterranean region will be particularly affected by the weight of tourism, the fall in domestic demand due to containment measures and the slowdown in foreign direct investment. Thus, EBRD forecasts that the economies of the region will contract by 0.8% in 2020 as a whole, although there will be a 4.8% rebound in 2021. The entity warns that all projections are subject to "unprecedented uncertainty". "If social disengagement continues for much longer than expected, the recession could be much deeper and per capita production levels in 2019 will not be reached again in the coming years," the report says.
In all regions where the EBRD invests - Central and Eastern Europe, Central Asia and the Middle East and North Africa - containment measures have affected domestic demand and supply. The external shocks include a sharp drop in commodity prices, disruption of global value chains, collapse of tourism, and decline in remittances.
