Report: The European Union is preparing a financial aid package for Egypt

The Financial Times reported on Wednesday that the European Union is preparing a 7.4 billion euro ($8.08 billion) aid package for Egypt aimed at supporting its economy, amid fears that the conflict in Gaza and Sudan will exacerbate the country’s financial problems.

The newspaper said that European Commission President Ursula von der Leyen will go to Cairo on Sunday with the prime ministers of Greece, Italy and Belgium to finalize the agreement and announce it.

Egypt is suffering from one of the worst economic crises in its history, after the annual inflation rate recorded a record level, currently reaching 35.2 percent, driven by the decline in the value of the local currency and the shortage of foreign currency in light of the import of the majority of food.

Egypt’s foreign debts have more than tripled in the last decade to reach $164.7 billion, according to official figures, including more than $42 billion due this year.

On March 6, the Egyptian government announced the signing of an agreement with the International Monetary Fund to obtain a new loan, hours after a decision by the Central Bank allowing the “liberalization” of the pound’s exchange rate.

The Fund approved a long-awaited loan to Egypt amounting to eight billion dollars, an increase from the three billion dollars that was previously being talked about, according to Reuters.

The agreement was signed after the value of the Egyptian pound was reduced to an unprecedented low level of 49 pounds to the dollar, from about 30.85 pounds, as adopting a more flexible exchange rate is a major requirement in the International Monetary Fund’s support program.

Egyptian Prime Minister Mostafa Madbouly said, “We will obtain an environmental sustainability loan of about $1.2 billion, bringing the total to about $9 billion.”

During a joint press conference with officials from the International Monetary Fund, the governor of the Central Bank, and ministers in the Egyptian government, Madbouly considered that “this agreement will help increase the foreign reserves of the Egyptian state.”

Madbouly stressed that there is great agreement between Egypt and the International Monetary Fund on the terms of the agreement, pointing out that the government seeks to increase foreign investments instead of local investments, exit the state from the economy, and open the way more for the private sector.

He said: “We are working to reduce inflation, create job opportunities, and ensure the inflow of foreign investments.”

Egypt suffers from a chronic shortage of foreign currency. The central bank said that its measures were “supported by bilateral and multilateral partners” and that “the necessary financing has been provided to support foreign exchange liquidity.”

The shortage of foreign currency curbs commercial activity in the country and causes an accumulation of goods at the ports and delays in payment for goods.

Remittances from Egyptians working abroad, the country’s main source of foreign currency, slowed sharply amid expectations of a decline in the pound.

Egypt is betting on hard currency inflows from investment projects, including a $35 billion deal signed with the UAE in late February.

The Egyptian government says that $10 billion of these funds have already been transferred, and the remaining funds are scheduled to arrive within two months of signing the deal.

However, analysts say that doubts remain about Egypt’s commitment to structural reforms that it has often postponed, including the liberalization of the currency exchange rate and the state and army relinquishing their control over economic activity.

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