Egypt floats its currency, agrees with the IMF to increase bailout loan to $8 billion

abcnews.go.com:

Egypt has floated its currency and announced a deal with the International Monetary Fund to increase its bailout loan to $8 billion

CAIRO — Egypt on Wednesday floated its currency and announced a deal with the International Monetary Fund to increase its bailout loan from $3 billion to $8 billion, moving to shore up an economy hit by a staggering shortage of foreign currency and soaring inflation.

The flotation of the Egyptian pound, combined with a sharp raise of the main interest rate, is meant to combat inflationary waves and attract foreign investment. The measures, announced by the Central Bank of Egypt early Wednesday, were among the key demands of the IMF to increase its $3 billion bailout loan that both parties agreed to in 2022. The Central Bank increased the key interest rate by 600 basis points to 27.75%.

Following the announcement, the pound began floating and within hours lost more than 60% of its value against the dollar. By the end of the day, commercial banks were trading the U.S. currency at more than 50 pounds for $1, up from about 31 pounds.

The Egyptian economy has been hit hard by years of government austerity, the coronavirus pandemic, the fallout from the war in Ukraine, and most recently, the Israel-Hamas war in Gaza.

The war in Ukraine, which rattled the global economy, hit cash-strapped Egypt where it is financially vulnerable — the most populous Arab country is the world’s biggest importer of wheat and needs to buy a majority of its food from other countries to help feed its population of more than 104 million people.

The Central Bank of Egypt said its measures Wednesday would help end the black market in currencies and slow inflation, which reached unprecedented levels in recent months. The