The International Monetary Fund’s (IMF) executive board gave the final approval for a three-year US$12 billion loan to Egypt during a meeting on Friday.
According to UK-based news agency Reuters, the IMF stated on Thursday that it would dispense the first tranche of the loan, amounting to $2.75 billion, on Friday pending approval from the board.
Managing director of the IMF Christine Lagarde also announced her plans to endorse the loan during Friday’s board meeting, according to an official statement published on November 8.
The final approval comes three months after Egypt and the IMF reached a staff-level agreement regarding the loan, following which the government implemented a series of economic reforms to meet the fund’s conditions.
IMF’s Board of Governors includes representatives from all member states, who select the Executive Board of 24 members and the director. The Executive Board is selected by appointment or election through a state or several member states.
The voting power of each state within the IMF is determined according to its contribution to the fund. The United States hold the highest percentage of the vote, 16.54 percent, reflecting its contribution to the fund. Japan comes second with 6.16 percent, followed by China at 6.09 percent. Fifteen member states follow, including Belgium, the Netherlands and Israel which share 5.33 percent of the vote. France and the United Kingdom each have 4.04 percent of the vote.
During a visit from the US business delegation on October 24, David Thorne, senior adviser to the US secretary of state, said his country would vote in favor of granting Egypt the loan at the Executive Board meeting.
The approval of Egypt’s IMF loan follows the implementation of various measures fulfilling the fund’s conditions, including the devaluation of the local currency, the lifting of fuel subsidies and aggregating $6 billion in bilateral loans.
Egypt devalued the pound on November 3, and subsequently lifted fuel subsidies by 30 to 46 percent. The state also managed to guarantee the $6 billion through a currency swapping deal with China worth $2.7 billion, a $3 billion deposit from Saudi and $1 billion from the Emirates.
Egypt also announced the issuance of international bonds worth $2 million to support its national currency reserves. The move was followed by an increase in the value of the pound on November 10, which was also prompted by the imminent approval of the IMF loan, according to Reuters.