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Egypt in new round of talks with the IMF for support

March 22, 2022 at 11:59 am

The International Monetary Fund (Headquarters 2) located at 1900 Pennsylvania Avenue, NW, in the Foggy Bottom neighborhood of Washington, D.C on 7 June 2010 [Wikimedia]

Egypt is in a new round of talks with the IMF for support, which could include a new loan, as the Russian invasion of Ukraine takes its toll on the economy.

A precautionary and liquidity line or a policy coordination instrument are among the options being discussed, according to Bloomberg, though talks are confidential.

On Monday the Egyptian pound depreciated by almost 14 per cent as foreign investors withdrew from Egypt as the fighting in Ukraine reaches the end of its fourth week.

Yesterday Human Rights Watch said that the Russian invasion is already exacerbating rising food prices and deepening poverty in the Middle East and North Africa.

Egypt relies on Russia and Ukraine for roughly 80 per cent of wheat imports. The two countries are leading exporters of agricultural products to the MENA region and the war and sanctions are disrupting this supply.

READ: India prepares to export wheat to Egypt as fears grow Ukraine conflict will worsen food crisis

Food prices across the world were already at a 10-year high due to inflation and the global coronavirus pandemic and the fallout from the war is exacerbating the problem.

The IMF approved a $12 billion loan for Egypt in 2016 to help prevent economic collapse in exchange for Cairo agreeing to roll out a set of austerity measures, including reducing energy subsidies.

Cairo has raised the price of petrol, electricity, and food commodities several times which ordinary Egyptians, a third of whom live below the poverty line, have struggled to afford.

At the time the government also floated the currency, which halved people’s salaries.

Then in 2020 Egypt took another loan from the IMF, this time for $5.2 million, to help the country deal with the aftereffects of the global coronavirus pandemic.

The IMF has been criticised by rights groups including Human Rights Watch because the conditions of the loan did not address human rights and transparency concerns.

There are roughly 60,000 political prisoners in Egypt who are systematically tortured. Freedom of expression is heavily monitored and a widescale crackdown in place, particularly on dissidents.

During the height of the pandemic the World Bank approved a loan of $50 million for a coronavirus health project yet did not address the issue of reprisals against health care workers, including imprisoning doctors who questioned the official statistics on covid rates.