The Washington-based IMF has reached a staff-level agreement with Egypt for a $12bn three-year funding facility to support a government reform programme. This will help the most populous Arab country to bolster stagnant economy stability ease a foreign crisis.

The final deal is still subject to approval by the IMF’s executive board, which is expected to consider Egypt’s funding request in the coming weeks, Chris Jarvis, the IMF’s Egypt mission head was quoted as saying in a statement.

Egypt’s reform programme is aimed to improve foreign exchange markets and reduce the budget deficit as well as accelerating growth. The central bank will focus on boosting its foreign reserves and bringing inflation down to single digits, according to the statement.

The IMF said moving to a flexible exchange rate regime would strengthen the country’s competitiveness, boost exports and attract foreign direct investment. It called on Egypt’s bilateral partners to step forward and support the country.

Egypt is targeting a total of $21bn in funding over three years which includes the $12bn from the IMF. It plans to secure the rest of the funds from bilateral accords and international institutions, which includes $3bn and $1.5bn facilities from the US-based World Bank and African Development Bank, respectively, according to deputy finance minister Ahmed Kouchouk.

Successive governments in Egypt have sought to secure IMF financing, but the country over the past few years has mostly been supported by Arab allies, including Saudi Arabia and the UAE, who have stepped in to plug the funding gap.

Cairo could obtain another loan of $2bn from its two main Gulf supporters within the next few weeks. The government is in talks with both Saudi Arabia and the UAE for new funding, which will be contributed equally by the Arab states, Egyptian daily Al-Shorouk reported.

Egypt is facing a foreign currency shortage that has hampered economic growth and has given rise to calls for further devaluation, or even flotation, of the pound.

Foreign reserves have plummeted as investors and tourists shunned the country following the 2011 popular uprising that saw the ouster of then President Hosni Mubarak.

The country’s tourism sector in particular was heavily affected by the downing of a Russian passenger flight in October last year. The number of foreign tourists visiting Egypt in the first quarter of 2016 fell 40 per cent compared with the same period in 2015.

Egypt’s real GDP is forecast to expand by 3.3 per cent in 2016, after 4.2 per cent growth in 2015, according to the IMF’s 2016 World Economic Outlook..

Since removing his Islamist predecessor in an army takeover and becoming president, Abdul Fattah al-Sisi has pushed through controversial measures, including cuts in fuel and electricity subsidies, which the previous governments avoided.

Lawmakers are discussing the introduction of value-added tax (VAT) to increase revenues and cut the budget deficit, which reached 11.5 per cent of economic output in the past fiscal year.