On March 17 a delegation of EU leaders visited Cairo and announced that the EU Commission had decided to provide Egypt with finance totaling $8.1 billion (some 32 billion shekels) over the three years 2024 – 2027. Amidst the flurry of self-congratulatory statements, neither side specified what one particular tranche of the package was for.
That Egypt needs the money, it goes without saying. The country has been in economic difficulties for years. Russia’s 2022 invasion of Ukraine made matters worse. The country relied heavily on wheat imports from both Russia and Ukraine, and food prices increased by more than 70%. The International Monetary Fund (IMF), which has supported the Egyptian government over the past 8 years with loans, has demanded strict financial controls. Government action taken to meet IMF conditions, such as the removal of bread and fuel subsidies, new value-added taxes, and an increase in metro fares, aroused public opposition.
In August 2023 inflation in Egypt hit a record year-on-year high of just under 40%, while the Egyptian pound was losing value hand over fist. Over 2023 the cost of a US dollar hovered around 30 Egyptian pounds. At the beginning of March 2024 it was 70 pounds.
Then Egypt’s fortunes suddenly took a turn for the better. Three recent announcements in quick succession have dissipated the financial gloom.
Impressed with the steps Egypt has taken to tighten the economy, and after Cairo agreed to further financial reforms including a flexible exchange rate and raised interest rates, on March 6 the IMF agreed to a $5 billion increase in the........