Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva stated that Egypt and the lender are in advanced discussions regarding the augmentation of the Egyptian loan programme.
“We are in this very last stretch when we are working on the details of implementation … We are very close. So we are not talking about a long protracted period at all,” Georgieva said in a media roundtable on Friday.
She made the comments following the conclusion of the IMF delegation’s visit to Egypt to discuss the finalization of the first and second reviews of Egypt’s reform programme, which is supported by the IMF’s Extended Fund Facility (EFF).
The IMF chief highlighted that Egypt is among the countries most severely affected by recent global challenges, including the economic implications of COVID-19 as well as the developments in Ukraine, Sudan, and Gaza.
Moreover, Georgieva emphasized that Egypt is experiencing significant losses amounting to “hundreds of millions of dollars,” due to the drop in Suez Canal revenues caused by the heightened tensions in the Red Sea and the rerouting of ships around the Cape of Good Hope.
“The problems Egypt is dealing with are complex, so it requires us to thoughtfully and thoroughly go to how best to address them. And we are making very significant progress in that regard,” Georgieva told reporters.
She also underscored the discussions with Egypt about augmenting the loan programme in light of the widening “financial gap” in the country and the developments over the last months.
Georgieva said the IMF collaboration with Egypt is a “very high priority” given its impact on the Egyptian economy, the people, as well as the region.
“This is one of the top issues for us, how we can best support Egypt in this very difficult time. Needless to say, for the Egyptian people, but also for regional stability,” she added.
Georgieva mentioned that Egypt has requested the IMF support in its efforts to combat inflation and is considering “systematic adjustments” in state policies. However, she declined to provide further details about the agreements until they were finalized.
In December 2022, the IMF approved a four-year $3 billion EFF loan programme for Egypt. Global credit rating agency Moody’s has expected the expansion of the program to $10 billion to help the country effectively address its current and upcoming fiscal year’s external funding gap.
The completion of the programme’s first and second reviews faced delays due to ongoing challenges in Egypt resulting from global and regional geopolitical tensions.
Under the EFF, Egypt committed to implementing flexible interest and exchange rate regimes, promoting private sector participation in the economy, and reducing debt and inflation levels to pre-pandemic figures by the end of the program.
According to Moody’s report last month, the completion of the two reviews is expected to occur in the coming weeks, accompanied by a possible devaluation of the Egyptian pound and the implementation of stricter monetary and fiscal policies to eliminate the currency parallel market.
On Thursday, the Central Bank of Egypt (CBE) raised key interest rates by two percent (200 bps).
This move could expedite measures for the IMF augmented rescue package and pave the way for another devaluation.
Since March 2022, the Egyptian government has already devalued its currency three times, resulting in a depreciation of around 70 percent against the US dollar.
The devaluation is gaining growing significance as the USD is currently being traded for over EGP 66 on the parallel market, while the official exchange rate remains at nearly EGP 31 per dollar.
