Egypt said on Thursday it would ask the World Bank for a $500 million loan and another $500 million loan from the African Development Bank to help it fill a budget gap widened by a year of political and economic turmoil.
Egypt has also persuaded the International Monetary Fund (IMF) to reduce the interest rate it would charge on $3.2 billion loan Cairo had requested from the IMF, Planning and International Cooperation Minister Faiza Abu al-Naga told reporters.
“We have achieved a reduction from the IMF on the interest rate on the loan from 1.5 to 1.1 percent,” she said, adding that this would put the cost of the finance more in line with interest rates worldwide.
The turmoil in Egypt has pushed up unemployment, widened its budget and balance of payments deficits and drained its foreign reserves. Many economists believe a currency devaluation is imminent.
Egypt announced earlier this month it had formally asked the IMF for an aid package, saying it wanted the money as soon as possible and hoped an agreement would be signed within weeks.
The IMF, however, says any agreement would have to be accompanied by financial commitments from other international donors and attract broad political support within the country.
Thrashing out the technical details of a loan will take two to three months, it said.
The World Bank and African Development Bank loans would carry an interest rate of between 7 and 8 percent, Abu el-Naga said. Egypt would request a mission from the World Bank come to Egypt soon, she added, without giving details or a date.
The central bank, trying to keep the Egyptian pound stable against the dollar, has run through $9 billion of its foreign reserves since June, when the government rejected an IMF agreement similar to the one it is now seeking.
The depletion accelerated before the parliamentary election and during a series of violent political protests in November and December, with the central bank spending at least $2 billion in each of the last three months. By the end of December, reserves had fallen to $18 billion.