Egypt needs to move forward with another currency devaluation or we will “bleed” reserves, IMF Managing Director Kristalina Georgieva told Bloomberg in an interview late last week.

Remember: The IMF has delayed two reviews of our USD 3 bn assistance program after we failed to meet several conditions of the loan, including a commitment to implement a fully flexible exchange rate. Pundits expect the Central Bank of Egypt to allow the currency to float freely to get the Fund’s sign-off and unlock the next two tranches of the loan, though most analysts don’t expect this to happen before the presidential election in December.

The sooner this happens the better, says Georgieva: “The sooner we can reach an agreement on the road map for [EGP devaluation] the better … The issue here is very simple. Egypt would bleed reserves protecting the EGP and neither the country nor overall the environment is such that this is desirable. That’s a problem that has to be solved,” she said.

Should we expect more news in the coming week or two? Egypt and the Fund are “making progress” on a review, Georgieva said. “In the last couple of days there have been some constructive engagements … There will be more systematic work of our team with Egypt. So stay tuned. Let’s see what will come out in the next weeks.” Officials plan to meet during the IMF / World Bank annual meetings, which take place from 9-15 October, Cairo24 quotes House Planning Committee Chair Fakhri El Fiqi as saying.

The Fund will hold off on its review of the health of the our economy (otherwise known as an Article IV consultation) until after it has completed the reviews, Bloomberg reported Wednesday. “We are giving priority to engaging with the authorities on steps to complete the review under the Extended Fund Facility to support macroeconomic stabilization,” an IMF spokesperson told the news outlet last week. “Once the review is completed, we will schedule the Article IV consultation.

More economic reforms post elections: “The way markets have understood moving forward the presidential elections from 1Q 2024 to December is that the reforms initially earmarked for 2023 will wait till post elections,” Standard Chartered Bank economist Carla Slim told Asharq Business (watch, runtime: 8:25).

Further finance from the IMF? “Egypt could get an additional USD 1 bn from the IMF, while other market players believe that the IMF may revisit Egypt’s loan program, pushing it to USD 5-6 bn from its original USD 3 bn,” Slim said, echoing what economist Hany Geneina told us last week.

We’ve been gradually adding to our FX reserve stockpile: FX reserves have increased by more than USD 1.8 bn since mid-2022, after Russia’s invasion of Ukraine precipitated heavy capital outflows and caused its FX stockpile to fall almost USD 8 bn. Reserves inched up USD 42 mn to USD 34.97 bn during September, according to central bank data released last week. Some USD 29.9 bn of our FX reserves is made up of short- (USD 14.9 bn) and long-term (USD 15 bn) central bank deposits made by Saudi Arabia, the UAE, Qatar, Kuwait and Libya.

But maintaining a stable exchange rate is increasing FX stress: The central bank has maintained the USD / EGP exchange rate at 30.9 since March, exacerbating the ongoing shortage of FX, Bloomberg says. FX liquidity in the banking system has continued to deteriorate this year, with net foreign liabilities among commercial banks widening to USD 16.5 bn in August.

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