One thing off the IMF’s checklist? The IMF is starting to believe the government is serious about its ambitions to sell down state assets, a change in sentiment that it says could ease the path towards the all-important review of our USD 3 bn loan program. That’s according to an important piece by Bloomberg ’s Mirette Magdy, who reported yesterday that a number of recent agreements with Gulf and local investors have been met with a positive response from the Fund.

Remember: The IMF has postponed the first and second reviews of the reform program (originally scheduled for March and September) after we fell short of complying with key conditions of the loan, including an acceleration of the government’s privatization plans as well as properly floating the EGP. Passing these two reviews would unlock almost USD 700 mn in fresh financing — and, perhaps most critically, provide a confidence-booster to investors that we’re on the right track to exit the current economic crisis.

Cabinet has made important progress: The Madbouly government announced in July that it had agreed to sell a number of state-owned assets for USD 1.9 bn, some USD 1.6 bn of which would be paid for in foreign currency. Folks in government are confident that USD 800 mn of that will be received any day now when ADQ is expected to sign final contracts to acquire stakes in three oil and chemical firms. More asset sales are expected in the coming weeks and months, with the Gabal El Zeit and Zafarana wind farms, the military’s Wataniya and Safi, and one of the Siemens combined-cycle power plants all the subject of ongoing talks with prospective buyers.

Yes, but… In its ongoing talks with the government, the IMF is now focusing on what will happen with the currency and is trying to obtain more information about the government’s expenditure on infrastructure projects. Under the program, the government committed to transitioning to a fully flexible exchange rate as well as slow infrastructure spending, which has been blamed on raising inflation, using up FX resources, and increasing national debt.

The election is a complicating factor: Authorities are unlikely to move to devalue the currency before the presidential vote, and even though this has been brought forward to December, there remains little time for the IMF to complete the review this year, Bloomberg says. Government officials have reportedly expressed confidence to the news outlet that a breakthrough can be made this year, though they didn’t disclose any information about a potential devaluation.

A potential way forward: The two sides are reportedly discussing the idea of first signing off on a staff-level agreement and then devaluing the currency. That would allow the IMF’s board to release USD that Hassan Abdalla and his team at the central bank would need to have on hand (alongside plenty more) to fight a potential overshoot during the float.

The caveat: The IMF is taking a harder line on FX flexibility this time around and is pushing officials to avoid a managed devaluation, according to Bloomberg’s sources.

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