{"id":546526,"date":"2022-05-19T04:00:03","date_gmt":"2022-05-19T04:00:03","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2022\/05\/19\/egypt-negotiating-limited-imf-loan-amer\/"},"modified":"2022-05-19T04:00:03","modified_gmt":"2022-05-19T04:00:03","slug":"egypt-negotiating-limited-imf-loan-amer","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2022\/05\/19\/egypt-negotiating-limited-imf-loan-amer\/","title":{"rendered":"Egypt negotiating \u201climited\u201d IMF loan -Amer"},"content":{"rendered":"

<\/a> Amer dials back expectations for large IMF package:<\/strong> Negotiations between Egypt and the IMF for a fresh assistance program are focusing on a \u201climited\u201d amount of funding, Central Bank of Egypt Governor Tarek Amer told Bloomberg Asharq on the sidelines of a meeting of the Union of Arab Banks yesterday (watch, runtime: 0:20)<\/a>.<\/p>\n

REFRESHER- <\/strong>The government has been in talks with the IMF<\/a> since March for a new assistance program to help it mitigate the impact on our economy of Russia\u2019s war in Ukraine and rising interest rates around the world. The talks were said<\/a> to be in the technical phase in April, though Prime Minister Moustafa Madbouly said earlier this week<\/a> that it could still take months before an agreement is reached.<\/p>\n

We could be looking at USD 3-4 bn:<\/strong> Fakhry El Fiky, head of the House Planning Committee, said last month that Egypt could be in line for a precautionary and liquidity line<\/a> worth around USD 3.5 bn.<\/p>\n

Why a small program? Egypt has exhausted its quota.<\/strong> Egypt has borrowed USD 20 bn from the IMF since 2016, and though it started to pay back the first USD 12 bn facility last year, it remains far beyond its quota. This means that further borrowing will be under exceptional access criteria, requiring us to comply with more stringent conditions. \u201cEgypt has taken a big allocation so [the loan] will not be big,\u201d Amer said at the Union of Arab Banks meeting yesterday. \u201cWe\u2019re going to the IMF to benefit from structural reforms.\u201d<\/p>\n

Here\u2019s what could be on the table:<\/strong> \u201cA commitment to continued exchange rate flexibility will likely be a key pillar of any programme, alongside primary balance targets that set debt on a sustainable downward path, and a greater commitment to longer-term structural reforms that have so far gained little traction,\u201d Patrick Curran, senior economist at Tellimer Research, wrote in a note earlier this month.<\/p>\n

Precursors to financing?<\/strong> The CBE in March allowed the EGP to slide<\/a> roughly 18% against the USD. The negotiations have also coincided with the government announcing new pledges to privatize a swathe of industries, doubling the private sector\u2019s share of the economy over the next three years.<\/p>\n

What happens next depends on how the IMF assesses the sustainability of our debt position:<\/strong> Comments made recently by IMF head Kristalina Georgieva raised the possibility that the IMF could declare Egypt\u2019s debt as unsustainable. \u201cWe have to press for debt restructuring \u2026 we will sit with Sri Lanka, we will sit with Egypt, we will sit with Tunisia, and we will discuss what realistically needs to be done,\" she said in an interview<\/a> prior to last month\u2019s Spring Meetings. \u201cThis raises the risk that the IMF may classify Egypt\u2019s debt as unsustainable and require a restructuring to unlock Fund support,\u201d Curran wrote. The government expects debt payments to eat almost half its revenues<\/a> in the coming fiscal year.<\/p>\n

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Amer defends CBE record:<\/strong> Speaking to a room of bankers and monetary policymakers at the UAB meeting, Amer used the occasion to outline how he sees the CBE\u2019s record responding to a succession of domestic and global economic crises. \u201cEgypt was subject to a large exodus of international investors and pressure caused by inflation, prompting the CBE to take a set of measures such as using part of the cash reserves to support the markets and issuing certificates with an 18% interest rate,\u201d he said during his address (pdf)<\/a>.<\/p>\n

From the speech:<\/strong><\/p>\n