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Reviews of Egypt’s previous IMF loan program near completion: The IMF’s long-stalled first and second reviews of Egypt’s USD 3 bn loan program are in their final stages and are expected to be completed “in a few short weeks,” IMF Managing Director Kristalina Georgieva told Asharq Business yesterday on the sidelines of the World Governments Summit in Dubai. Egyptian officials and the IMF have already agreed on all “the key issues for the review,” Georgieva told Al Arabiya Business in a separate interview at the summit.
More encouraging words on the size of the package: Georgieva said that the Fund is preparing a “large amount” of additional funding to “give a dose of confidence to the Egyptian economy by enhancing the size of the support program.”
No word on the exact size of the package, but Enterprise sources with knowledge have put it in the USD 6-9 bn ballpark. Meanwhile, one government source believes the government is closing in on a combined USD 12 bn in financing, with the IMF doubling the value of the package it had offered to USD 6 bn and other, unnamed “development partners” contributing a further USD 6 bn — a figure echoe by Gooldman Sachs.
Multiple exchange rates are “disastrous” for Egypt, Georgieva told Al Arabiya Business. She emphasized the need for Egypt to move in a direction that allows the exchange rate to be determined by market forces and eliminate the parallel market. Georgieva has been very vocal about the need for Egypt to devalue its currency, explaining that otherwise the country risks bleeding reserves.
No full float on the cards: Georgieva confirmed that the Fund’s talks with Egypt have been about a more flexible exchange rate, but not a float of the EGP. The Fund is currently waiting on Egyptian authorities to allow a more flexible exchange rate and fulfill other conditions before it grants us more funding, she added, without specifying what those other promises are.
Reducing inflation is still the main target: “Policy makers in Egypt must focus on inflation,” Georgieva told Asharq Business, reiterating earlier comments from the international lender’s director of communications, Julie Kozack, who said last month that the IMF is supporting the government “to reduce inflation and to gradually move to an inflation-targeting regime.”
IMF calms tone on state asset sales: “The situation in Gaza has put pressure on Egypt, including its state assets sales program, and we want Egypt to sell at the appropriate time,” Georgieva said. She called for the government to not “rush to sell shares in government companies under the current circumstances,” in contrast to the Fund’s position in April last year, when it postponed the first review of the country’s USD 3 bn assistance package partly due to the lack of progress on privatizing state-owned companies.
