Egypt said on Wednesday it had reached an agreement with the International Monetary Fund to increase a bailout loan to $8 billion.
Prime Minister Moustafa Madbouly announced the news during televised comments on Wednesday. Egypt has been negotiating for months with the IMF to increase a $3 billion bailout loan the two sides agreed to in 2022.
Mr Madbouly said the new agreement will allow the government to receive loans from other financial institutions, including the World Bank. The announcement came hours after Egypt's central bank raised its main interest rate and floated the currency.
These measures are among the main requirements of the IMF. They are intended to fight against waves of inflation and attract foreign investment , while the country is experiencing a serious shortage of foreign currency .
After the currency announcement, the pound began to float and, within hours, lost more than 60% of its value against the dollar. By early afternoon, commercial banks were trading the U.S. currency at more than 50 pounds to the dollar, down from around 31 pounds to the dollar.
The central bank increased the key interest rate by 600 basis points to 27.75%. The overnight deposit rate and lending rate were also increased by 600 basis points to 27.25% and 28.25% respectively, the bank said in a statement.
Egypt's economy has been hit hard by years of government austerity , the coronavirus pandemic , the fallout from the war in Ukraine and, most recently, the war between Israel and Hamas in Gaza.
The war in Ukraine, which has shaken the global economy, has hit cash-strapped Egypt where it is financially vulnerable - the most populous Arab country is the world's largest wheat importer and must buy the majority of its food to other countries to help feed its population of more than 104 million.