Egypt said it has reached a deal with the International Monetary Fund (IMF) to increase a bailout loan to eight billion dollars (£6.3 billion).

Prime Minister Moustafa Madbouly announced the news in televised comments on Wednesday.

Egypt has for months negotiated with the IMF to increase a three billion dollar (£2.36 billion) bailout loan that both parties reached in 2022.

Mr Madbouly said the new deal will enable the government to receive loans from other financial institutions including the World Bank.

The announcement came hours after Egypt’s Central Bank raised its main interest rate and floated the currency.

The measures have been among the key demands of the IMF. They are meant to combat inflationary waves and attract foreign investment as the country experiences a staggering shortage of foreign currency.

Following the currency announcement, the Egyptian pound began floating and within hours lost more than 60% of its value against the dollar.

By early afternoon, commercial banks were trading the US currency at more than 50 pounds for one dollar (39 pounds for £1 sterling), up from about 31 pounds for the dollar.

The central bank increased the key interest rate by 600 basis points to 27.75%.

The overnight deposit and lending rate were also raised by 600 basis points to 27.25% and 28.25% respectively, the bank said in a statement.

The Egyptian economy has been hit hard by years of government austerity, the coronavirus pandemic, the fallout from the war in Ukraine, and most recently, the Israel-Hamas war in Gaza.

The war in Ukraine, which rattled the global economy, hit cash-strapped Egypt where it is financially vulnerable. The most populous Arab country is the world’s biggest importer of wheat and needs to buy a majority of its food from other countries to help feed its population of more than 104 million people.