The International Monetary Fund (IMF) has just approved a $12 billion loan to Egypt in a move that will finally give off optimism and confidence about the Egyptian economy. The loan is the largest of its kind on record in North Africa and the Middle East and it came only a few days after Cairo allowed its currency to float freely in an attempt to put an end to the currency crisis that cut the value of the Egyptian pound by more than 50% and prevented imports of consumer goods including sugar and staples.
Egypt has been trying to recover its economy since the 2011 uprising that toppled Hosni Mubarak’s 30-year rule and his Islamic successor in 2013. Boosting confidence and trust in the economy by pursuing reform efforts will help attract investment that will in turn create jobs and reverse declining living standards. Although the economy is recovering, economic growth is slower than expected and still not enough to address rampant joblessness.
The economy has been largely kicked off by external flows, which are helping instill stability in the foreign exchange market, and by the sale of Eurobonds. Egypt’s stock market is the best performer in Africa and one of the best performers in emerging markets. Economists now expect that the cheaper Egyptian pound will also help boost tourism, which has suffered from Russia’s, Britain’s and Germany’s suspension of flights to the country.
The European Union is heavily supporting Egypt’s economic recovery. The European Neighborhood Instrument (ENI) is the key EU financial instrument for bloc’s cooperation with Egypt for the period 2014-2020. EU assistance to Egypt takes mainly the form of country Annual Action Programs funded every year under the ENI. Egypt also benefits from funding under the EU Emergency Trust Fund for stability that also seeks to address root causes of irregular migration and displaced persons in Africa.