Egypt won International Monetary Fund (IMF) approval on Friday for a three-year $12 billion bailout programme aimed at reviving a struggling economy, bringing down public debt and controlling inflation while seeking to protect the poor.
Import-dependent Egypt has struggled to attract US dollars and revive its economy since tourists and investors fled after the 2011 uprising that ended Hosni Mubarak's 30-year rule.
Last week, Egypt raised fuel prices and floated its currency. The move was welcomed by bankers but bemoaned by ordinary people as the Egyptian pound weakened against the dollar; the latest blow to their diminishing spending power in a country that relies on imports.
The IMF said its executive board's approval immediately disbursed an initial loan tranche of $2.75 billion to Egypt's central bank. The remainder will be phased in over the next three years, subject to five reviews on required reforms. The injection of new funds increased the Central Bank of Egypt's foreign reserves to $23.3 billion, state television said in Cairo.
IMF Managing Director Christine Lagarde described the Egypt bailout as a "home-grown economic programme" that the IMF will support "to address longstanding challenges to the economy."
"These include a balance-of-payments problem manifested in an overvalued exchange rate and foreign exchange shortages, large budget deficits that led to rising public debt and low growth with high unemployment," Lagarde said. "The authorities recognise that resolute implementation of the policy package is essential to restore investor confidence."
Egypt made the final push for the loan after the central bank abandoned its currency peg of 8.8 Egyptian pounds to the US dollar last week in a dramatic devaluation move welcomed by the Fund and World Bank. The pound traded at just over 16 to the dollar on Friday.
The government of Egyptian President Abdel Fattah al-Sisi also took other key steps required by the IMF, including passage of a 13 percent value-added tax to raise revenues and reductions in fuel subsidies.
Some of the fiscal savings from austerity measures will be used to strengthen social safety nets, including by increasing food subsidies and direct transfers to the poor.
Clampdown on protests
But many Egyptians who would not qualify for such schemes complain they can no longer afford meat, while sugar shortages have driven fears of an impending food crisis.
Egypt imposed a big security clampdown in its cities on Friday as mass demonstrations were called to protest against austerity measures failed to take place.
Riot police and armoured vehicles filled the otherwise empty streets of central Cairo, but most people stayed at home.
Sisi came to power promising economic reform and stability but problems have piled up.
Egyptians feel clobbered by tax rises, soaring food price inflation and cuts in state subsidies. Egypt raised electricity prices by 25-40 percent in August.
In his speeches, Sisi has sought to persuade Egyptians that a collective sacrifice is necessary to save the country from financial ruin, even urging people to donate spare change, comments that drew online derision.
But he also warned that the army could be deployed within six hours in the event of street unrest.