cairo —

The International Monetary Fund’s executive board confirmed a deal with Egypt to increase rescue loans from $3 billion to $8 billion, a move aimed at boosting the Arab country’s economy, which is being hit by a severe shortage of foreign exchange. Inflation soared.

In a statement late on Friday, the board said its decision would give Egypt immediate access to about $820 million as part of the deal announced earlier this month.

The agreement came after Egypt agreed with the International Monetary Fund on a reform plan that centers on floating the currency, reducing public investment and allowing the private sector to become the engine of growth, the statement said.

Egypt has floated the pound and sharply raised key interest rates.

The dollar is currently trading above £47 at commercial banks and above £31. The measures are aimed at combating rising inflation and attracting foreign investment.

Egypt’s economy has been hit hard by years of government austerity, the coronavirus pandemic, Russia’s full-scale invasion of Ukraine and, most recently, Israel’s war with Hamas in Gaza. Houthi attacks on the Red Sea route have led to a significant reduction in revenue from the Suez Canal, a major source of foreign exchange. The attacks forced traffic away from the canal and around the corner of Africa.

“Egypt faces significant macroeconomic challenges, the management of which is made more complex given the spillover effects of the recent conflicts in Gaza and Israel. The disruption in the Red Sea has also reduced revenues from the Suez Canal, which accounts for foreign exchange inflows and fiscal an important source of revenue,” said Kristalina Georgieva, managing director of the International Monetary Fund.

The International Monetary Fund said such external shocks coupled with delayed reforms have hurt economic activity. Growth slowed to 3.8% in fiscal 2022-23 due to weak confidence and foreign currency shortages and is expected to slow further to 3% in fiscal 2023-24 before recovering to around 4.5% in fiscal 2024-25. the International Monetary Fund said in a statement.

The International Monetary Fund said annual inflation was 36% in February but expected to ease over the medium term.

A falling currency and rising interest rates are causing further pain to Egyptians already struggling with soaring prices over the past few years. According to official figures, nearly 30% of Egyptians live in poverty.

Finance Minister Mohamed Maait said the confirmation by the IMF’s executive board “reflects the importance of the corrective measures taken by the government”.

Egypt also signed a deal with the European Union this month that includes a 7.4 billion euro ($8 billion) aid package over three years to the most populous Arab country.

To quickly inject much-needed funds into Egypt’s staggering economy, the EU intends to fast-track €1 billion ($1.1 billion) of the program through an emergency financing process that bypasses parliamentary oversight and other safeguards, European Commission President Ursula von said. Dollar). Delaine.