{"id":617901,"date":"2024-03-31T00:00:00","date_gmt":"2024-03-31T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2024\/03\/31\/imf-greenlights-the-dispersal-of-usd-820-mn-after-approving-expanded-usd-8-bn-loan-program-plus-eu-fastracks-eur-1-bn-of-aid-package\/"},"modified":"2024-03-31T00:00:00","modified_gmt":"2024-03-31T00:00:00","slug":"imf-greenlights-the-dispersal-of-usd-820-mn-after-approving-expanded-usd-8-bn-loan-program-plus-eu-fastracks-eur-1-bn-of-aid-package","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2024\/03\/31\/imf-greenlights-the-dispersal-of-usd-820-mn-after-approving-expanded-usd-8-bn-loan-program-plus-eu-fastracks-eur-1-bn-of-aid-package\/","title":{"rendered":"IMF greenlights the dispersal of USD 820 mn after approving expanded USD 8 bn loan program. PLUS: EU fastracks EUR 1 bn of aid package"},"content":{"rendered":"

IMF money incoming: <\/strong>The International Monetary Fund\u2019s Executive Board has signed off on the USD 5 bn extension for Egypt\u2019s extended fund facility (EFF) and completed its long-delayed first and second reviews of the facility, the multilateral lender said<\/a> on Friday. Of the total USD 8 bn program, the Fund also approved a decision to let the state \u201cimmediately draw\u201d around USD 820 mn, which should be arriving this week, according to comments<\/a> made by Prime Minister Moustafa Madbouly yesterday.<\/p>\n

Why the top-up? <\/strong>A challenging macroeconomic environment of high inflation, foreign exchange shortages, and mounting debt \u2014 triggered in part by the war in Ukraine and exacerbated by the war on Gaza and tension in the Red Sea \u2014 have \u201ccalled for decisive domestic policy action supported by a more robust external financing package, including from the IMF,\u201d the lender said.<\/p>\n

Remember: <\/strong>Authorities announced the agreement<\/a> on the extension of the program earlier this month after floating the EGP and enacting a jumbo 600-bps interest rate hike, months after recurrent hints<\/a> from the IMF that we were in line for additional funding.<\/p>\n

The IMF has taken note of recent progress: <\/strong>\u201cRecent measures toward correcting macroeconomic imbalances, including unification of the exchange rate, clearance of the foreign exchange demand backlog, and significant tightening of monetary and fiscal policies, were difficult, but critical steps forward,\u201d the Fund\u2019s Managing Director Kristalina Georgieva said.<\/p>\n

But one key target is yet to be fulfilled:<\/strong> A criterion on net international reserves was the one quantitative performance target for end-June 2023 that Egypt failed to meet. The Executive Board approved a request by the government for a waiver \u201con the basis of corrective actions,\u201d the Fund said.<\/p>\n

Sustained reforms are \u201csubject to risks,\u201d<\/strong>Georgieva added at the end of her statement. The Fund\u2019s managing director warned that \u201cexternally, uncertainty remains high\u201d and that \u201csustaining the shift to a liberalized foreign exchange system, maintaining tight monetary and fiscal policies, and integrating transparently off-budget investment into macroeconomic policy decision making will be critical.\u201d She also cautioned that the country needs to manage the return of capital inflows well to reduce the risk of external pressures going forwards and to keep inflation under control.<\/p>\n

This has been a long time coming:<\/strong> The IMF approved Egypt\u2019s USD 3 bn EFF back in December 2022<\/a>, but held off on disbursing most of it and delayed two reviews \u2014 initially scheduled for March and September of last year \u2014 after we failed to meet several key conditions of the loan, including a commitment to implement a fully flexible exchange rate.<\/p>\n

More funds to follow?<\/strong> The expanded facility gives Egypt the right to apply for USD 1.2 bn in long-term, low-cost climate financing under the IMF\u2019s Resilience and Sustainability Facility, Finance Minister Mohamed Maait confirmed<\/a> yesterday.<\/p>\n

A look into the IMF\u2019s crystal ball:<\/strong><\/p>\n