Gov’t working to wrap up fifth review with IMF before the end of the month

The government is hoping to kick off the next fiscal year with its fifth review with the IMF under its belt — and with it the sizable fifth installment of the Extended Fund Facility Arrangement enroute to state coffers, a government source told EnterpriseAM. With so much having happened since the two agreed on the conditions for the loan — even in just the last 48 hours — sticking to these commitments by the book will be difficult, but thankfully, the Fund understands this as we approach our BoD 1 July deadline, we were told.

REMEMBER- A senior government official told us last week that the IMF was considering easing certain requirements for us to unlock the USD 1.3 bn tranche in light of a more unpredictable and challenging economic climate.

Indications of a downturn in tourism revenue following the (hopefully now ended) war between Israel and Iran are one concern, which have been discussed in ongoing negotiations between Egypt and the IMF we were told. Red Sea booking cancellations were highlighted as one of these indicators by our source, but it's still too early to assess the long-term impacts. Even with a newly announced ceasefire, it’s anyone’s guess if this fragile truce will continue and if the memory of the conflict will continue to push tourists away to other countries seen as “safer” destinations.

Recent questions over the steady recovery of Suez Canal traffic and revenues also weighed on the negotiations, with transit receipts from the Suez Canal — a key source of state revenues and FX, alongside tourism — having already dropped 62.3% y-o-y to USD 1.8 bn in 1H FY 2024-2025. Even with the recent ceasefire, recurrent regional escalations add further pressure on global shipping companies to push back their return to the waterway until a more permanent easing of regional tensions is achieved.

Uncertainty in the Red Sea has also pushed up shipping costs — and with it the price of goods. In addition to a rise in the country’s import bill, a now slower fall in projected inflation globally coupled with cuts to global growth forecasts will also do damage to our efforts to increase exports and attract FDI, our source added.

However, the recent fall in energy prices looks set to ease the strains on the budget, after analysts had warned only days ago we could be facing crude oil prices soaring past USD 130 per barrel if Iran closed the Strait of Hormuz.

The macroeconomic setting we have found ourselves in should strengthen our hand in negotiations, our source said. This could help us get some leniency to push back the Finance Ministry's plan to list 11 companies under the government’s privatization program, they added. The program could be pushed back to 2Q 2025 if regional escalations continue on the back of the effect it will have on investor sentiment, a senior government official told EnterpriseAM last week when the war was still ongoing.