Are we on track for the September IMF review? There are conflicting signals from government officials regarding the IMF’s anticipated review of our USD 3 bn loan program. An official at the Finance Ministry we talked to yesterday expressed optimism that the Fund will complete the review — scheduled for 15 September under the original agreement — on time, paving the way for the disbursement of the second and third loan tranches. Asharq Business is less sanguine, quoting an unnamed source as telling it that it is unlikely the review will wrap up this month.

The first review was originally supposed to take place in mid-March but was postponed after we fell short on meeting several key conditions of the loan agreement. The IMF was reportedly waiting for progress on the state asset sale program and the transition to a fully flexible exchange rate. The delay means that the IMF is expected to roll the first and second reviews into one when it next comes to Cairo, which would see the disbursement of almost USD 700 mn.

No date has been set: Our source and Asharq’s agree that the IMF has not yet set a date for the visit, but emphasized that the relationship is on a good footing and that the government is regularly following-up with Fund officials. The worst case scenario? We could be waiting until the end of the year before Fund officials arrive in town, according to Asharq’s source.

Gov’t is moving in the right direction on some reforms: “The Fund is happy with recent government moves — investment incentives, updated privatization program, and efforts to boost FDI,” our Finance Ministry source said. The Fund has publicly welcomed the government’s recent decision to sell USD 1.9 bn of state-owned assets, a step towards fulfilling its privatization goals under the loan agreement. It also made moves to improve the investment environment for the private sector and level the playing field, such as making amendments to the investment law and passing legislation to end tax exemptions for some state-owned and military companies.

The elephant in the room: What happens to the EGP? Transitioning to a fully-flexible exchange rate was one of the key conditions for the loan program and one of the factors that postponed the first review, leading to the widespread assumption that the first and second reviews would be dependent on a further devaluation of the EGP. The central bank has allowed the EGP to devalue by almost half against the greenback over the past 18 months, though the EGP-USD exchange rate has remained unchanged since March. President Abdel Fattah El Sisi suggested in June that he would not allow the currency to further devalue if it came at the expense of the nation’s citizens.

But could privatization momentum persuade the IMF to look the other way (for now)? The latest update to privatization plans “may help the two sides reach an agreement and could push the IMF to postpone some of its other requirements,” according to the source cited by Asharq Business.

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