IMF Managing Director Christine Lagarde said the bailout would "address longstanding challenges".
Egypt`s President Abdul Fattah al-Sisi is facing high unemployment and a budget deficit of 12% of GDP.
The country has struggled to attract foreign investment since the political turmoil in 2011 and the so-called Arab Spring, which saw former president Hosni Mubarak overthrown.
Tourism - traditionally a leading source of income for Egypt - has declined sharply over the past five years.
Last week Egypt floated its currency in a move that reduced its value by almost 50% against the dollar in an attempt to strengthen confidence in the economy.
The government also increased interest rates by three percentage points to 14.75%, and raised the price of basic commodities and fuel.
The moves led to widespread criticism of the president and a drop in his popularity. A big security operation was put in place in Cairo to pre-empt mass demonstrations that had been expected on Friday.
Ms Lagarde said the latest "home-grown economic plan" was intended to tackle the country`s large budget deficit, low growth and high unemployment rate.
She said that further reforms, such as reductions in fuel subsidies and legislation to reduce Egypt`s public sector wage bill, were necessary for the country to move forward.
"Resolute implementation of the policy package is essential to restore investor confidence," Ms Lagarde said.
In 2013, Egypt`s first democratically elected president, Mohammed Morsi, was ousted by the military, led by Gen Sisi, after only one year in power.
Mr Sisi was later elected president in May 2014.