SOS for Egypt: More than $50 billion comes in for her financial rescue.

The dire position in which it came in the previous period forced international organizations to intervene in its rescue, as a possible collapse would be an important imbalance factor for the Middle East and the Mediterranean basin, due to the strategic importance of the Arab country. The latest news of a 7.4 billion-euro EU package to support Egypt’s economy, amid fears that the conflicts in Gaza and Sudan may intensify its economic problems, came following the agreement the country concluded with the IMF a week ago to provide $8 billion. Just hours ago, the country’s central bank had released its currency and increased its one-day loan rate to 28.25% and the one-day deposit rate to 27.25%, in an attempt to slow inflation, which ranges to record levels of 36% and causes social distress to the tens of millions of Egyptians. In addition, Egypt will receive a $1.2 billion loan for environmental sustainability, raising its total from the IMF to more than $9 billion. However, this is not the first time the IMF has arrived in the country, as interventions in 1977, 1978, 1987, 1991, 1993, 1996, 2016, twice in 2020, and 2022 had been preceded. As Egypt’s prolonged economic crisis is linked to chronic currency shortages, Egypt’s main reform with the IMF is the devaluation of the Egyptian pound and the introduction of a variable exchange rate regime. The price of a US dollar was determined by the central bank last year at about 31 Egyptian pounds. Last week he dropped to about £50. The vulnerabilities of her national economy were particularly stressed when investors withdrew about $20 billion from Egyptian debt at the time Russia started the war in Ukraine. Furthermore, according to the IMF’s analysis, both tourist revenues ($13.6 billion in $2022-2023) and revenues from the Suez Canal ($700 million per month), which are significant foreign exchange sources for Egypt, are hit by Red Sea disturbances affecting currency flows, preventing incoming tourism and burdening trade resulting in currency shortages and increasing inflationary pressures. Collections from the Suez Canal were reduced by nearly half in January 2024 compared to a year ago. Thus, while the Egyptian economy was “bulling” at a rapid rate, in order to prevent a “free fall” at an even lower exchange rate of the pound, resulting in even higher inflation rates that would mainly affect poor households resulting in consequences of social unrest, the country found support, among other things, in an investment agreement of $35 billion in late February with the United Arab Emirates. The deal with one of Abu Dhabi’s three state investment funds concerns the development of the Ras El Hekma Peninsula and the goal to attract further investment goes up to $150 billion. Why Egypt is so important Egypt’s multifaceted rescue interventions are not random, as the country’s importance as a key regional factor cannot be overlooked, particularly in the context of the Middle East stability search. As a US strategic ally, its collapse would be detrimental to American interests, including their efforts to combat terrorism and the attempt to settle the Israeli-Palestinian conflict. Egypt has also played an important role in managing migration flows to Europe, while 6 million refugees are on its territory. More specifically, and in addition to Egypt’s traditional “special weight” in the Arab and Muslim world, Egypt with the Suez Canal provides rapid naval access to the US for military operations in the Middle East and international interventions to combat piracy, arms smuggling and illegal trade. Egypt also provides 7.5 million tonnes of LNG in Europe for home heating, fuel industry and supply of entire sectors of the economy. Ultimately, Egypt’s strategic geographical location in the Red Sea and the Mediterranean makes it ideal to provide access to key global markets in the Middle East and North Africa region and also overall to the African continent, Asia and Europe. It is associated with the international Ocean Trade routes to the US, Canada and South America. The Suez Canal is the shortest link between east and west due to its unique geographical location.