Egypt has lined up a USD 8 bn program with the International Monetary Fund and could add another USD 1-1.2 bn in climate finance if separate negotiations translate into an agreement, Prime Minister Moustafa Madbouly said at a press conference yesterday with Central Bank of Egypt Governor Hassan Abdalla and IMF mission chief for Egypt Ivanna Hollar (watch, runtime: 18:13).

The agreement came together yesterday after the central bank announced the float of the EGP and a jumbo rate hike. All of this was built on a pledge two weeks ago of up to USD 35 bn worth of investment from Abu Dhabi’s ADQ, including some USD 24 bn in payments for the development rights to Ras El Hekma. The first payment from ADQ arrived in Egypt last week.

The fine print: This agreement is subject to approval by the IMF’s executive board, which will meet to consider the pact before the end of the month, Hollar said at the presser.

And there might be more to come: The agreement will be followed by more funding — in soft loans — fromother international partners like the World Bank and EU, Madbouly added. (We don’t expect bns from the EU, which has perhaps EUR 500 mn more headroom for Egypt, we’re told.)

It will all come together to a “large comprehensive package,” Madbouly said at the press conference, adding that the funding “will once again allow Egypt to be fiscally stable and carry on with its structural reforms.” (Tap or click here to read the full cabinet statement.)

As the IMF sees it: The expanded package ”seeks to preserve debt sustainability, restore price stability, and reinstate a well-functioning exchange rate system, while continuing to push forward deep structural reforms to promote private sector-led growth and job creation,” Hollar said.

It should also open the door more for the private sector: The reforms are also aimed at “fostering an environment that enables private sector activity,” according to Hollar — a move that will create jobs and attract fresh investment.

What the prime minister is saying: The agreement comes within the framework of a wider set of structural reforms that aim to increase FX reserves, reduce foreign and local debt, ensure the consistent flow of FDI over the coming period, see the economy achieve high growth rates, and reduce inflation, the prime minister explained.

BACKGROUND AND FINE PRINT-

The war on Gaza also played a role in upping the package: Hollar cited the impact of the war on Gaza complicating macroeconomic challenges and its effect on tourism inflows and Suez Canal revenues as a reason behind its decision to nearly triple the size of the package — we had originally signed up for a USD 3 bn program, but it was effectively put on hold when we failed earlier to float the EGP.

MEANWHILE- Our first and second reviews are finally happening: The Fund and Egyptian authorities have reached a staff-level agreement “on the economic policies needed” to complete the two delayed reviews of our USD 3 bn loan program, Hollar said. The reviews had been pending the Fund’s approval that Egyptian policymakers had made sufficient efforts to reduce inflation and gradually move towards an inflation-targeting regime.

Remember: The IMF approved our 46-month USD 3 bn loan program back in December 2022, but we are yet to receive most of it after we time and time again fell short of complying with key conditions of the loan.

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