Unlocking a larger IMF package is “critical” for the success of Egypt’s loan program, the international lender’s director of communications, Julie Kozack, said during a press briefing (watch, runtime: 49:05). She did not provide any details on the size of the larger package needed or a timeline on when we can expect it to be announced.

We knew a larger IMF program was in the cards after IMF Managing Director KristalinaGeorgieva said in November that the Fund was “seriously considering” increasing Egypt’s USD 3 bn loan program, as pressures from the conflict in Gaza pose further pressures on the country.

It’s all still being negotiated: The Fund is currently in discussions with Egyptian authoritiesregarding the policy requirements necessary for the Fund to sign off on the first two reviews of the loan program, namely tightening fiscal and monetary policy and moving towards a flexible exchange rate, Kozack said. “We expect those discussions to continue in the coming weeks to operationalize the key policy priorities … which would support the authorities’ commitment to reduce inflation and to gradually move to an inflation-targeting regime,” she added.

The IMF acknowledges we’re in a tight spot: “Egypt already faces a complicated and challenging macroeconomic situation. And that situation has been made more complicated by the conflicts between Israel and Gaza,” Kozack said. She pointed to the impact of the war on “areas that support the current account” like tourism and Red Sea disruptions.

ICYMI: Georgieva met last week with CBE Governor Hassan Abdalla and Finance Minister Mohamed Maait, Kozack said, without giving away the details of the meetings, but signaled that there was “important progress in the discussions.”

How much are we talking? The government is reportedly looking for another USD 2 bn from the IMF, which would increase the loan program to USD 5 bn, unconfirmed media reports said in October. The usually well-sourced nighttime talkshow host Lamees El Hadidi says we could even get up to 4x what the fund had originally pledged, after her sources told her that authorities are in talks with the Fund over potentially raising the value of the loan to USD 10-12 bn (watch, runtime: 5:13).

MEANWHILE- JP Morgan Chase is taking Egypt out of its Government Bond Index-Emerging Markets — indices that track local currency bonds issued by EM governments — at the end of this month, the bank said in a report seen by Bloomberg. It will also remove the country from the Emerging Local Markets Index Plus (ELMI+) — a group of indices that tracks total returns for local currency denominated money market instruments in EMs — on 29 March due to the persistent FX shortage in the country.

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