The Egyptian Government has agreed a $500 million loan deal with the African Export-Import Bank (Afreximbank). The loan is expected to help the country reduce its forex scarcity and provide a forex lifeline for importers of goods and services.
Egypt like Nigeria has introduced foreign currency capital control that have limited outflow and inflow of forex from the country. Capital controls have hurt the economy with importers finding it hard to fund imports. The country also pegged its currency at 7.73 pounds to the dollar compared to 9 pounds at the black market.
Reuters explains that the deal will provide “trade liquidity” to Egyptian importers but will focus mainly on imports that the country considers as “strategic” to their economy.
President Buhari visited Egypt for one day last week where he participated in a Business for Africa summit that was aimed at accelerating private sector engagement and investment within Africa and promote the development of African ties and partnerships.
Nigeria has also approached the world bank and the Africa Development Bank for a combined $3.5 billion loan. Countries typically bridge foreign currency needs by borrowing from bilateral institutions. However, the rise of African owned institutions such as Afrexim and ADB provides African countries with facilities that won’t need to include the stringent reforms that the IMF would require.