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Georgieva: IMF Support to Egypt Would be of Large Size

Mon 12 Feb 2024 | 01:11 AM
Taarek Refaat

The Director of the International Monetary Fund (IMF) Kristalina Georgieva revealed in an interview with Al-Sharq Bloomberg that the expected increase in support to Egypt will be of a “large size,” also announcing that the Fund’s team has reached the final stages of completing the first and second reviews of Egypt’s program “within a few weeks.”

The International Monetary Fund mission concluded its visit to Cairo early last February and announced progress in discussions with the Egyptian authorities, while it will continue to hold virtual meetings to determine the amount of additional support needed to bridge the growing financing gap in the country. 

Bloomberg had talked about a potential deal, which might bring in partners, and whose financing would exceed $10 billion.

This comes at a time when the Egyptian economy is witnessing a stifling crisis, as a result of the severe scarcity of dollar liquidity and the increasing gap between the official and parallel exchange rates of the pound, with the decline in remittances from workers abroad and exports, a crisis reinforced by geopolitical tensions in the region.

Georgieva noted on the sidelines of the World Governments Summit held in Dubai, that the fund seeks “to give a dose of confidence to the Egyptian economy by enhancing the size of the support program,” adding: “We have identified the financing gap in Egypt and we will announce it after the completion of the negotiations.”

The Fund had postponed two reviews of Egypt's current program, which was agreed upon more than a year ago, waiting for the authorities to allow a more flexible exchange rate and fulfill other promises before handing over more money. 

Georgieva confirmed today that the talk with Egypt is about a flexible exchange rate and “not floating.”

Reaching an agreement with the Fund and development partners would contribute to extricating Egypt from its worst economic crisis in decades, as Israel’s war on neighboring Gaza increases the urgent need to achieve economic stability in the most populous country in the Middle East.

Georgieva said today that "when the time comes for reconstruction in Gaza, we will be present alongside the World Bank to support the Palestinian Authority."

 “Egypt is required to commit to some matters, including scheduling major projects under implementation ... The situation in Gaza has put pressure on Egypt, including the government proposal program, and we want Egypt to make public offerrings at the right time.” Appropriately, we do not want the government to rush to sell shares in government companies under the current circumstances.”

To provide dollar liquidity, Egypt recently worked to sell some of its assets to investors, and succeeded in raising up to $3.1 billion since March 2023 when it launched the government company offering program to date, and was preceded by $2.5 billion through the exit of government assets in 2022.

Inflation in Egyptian cities continued to slow in January for the fourth month in a row, despite the continued rise in the prices of some food items and the shortage of some with the scarcity of hard currency needed for imports.

The decline in consumer price growth over the past month was supported by a change in the base year. Consumer prices in Egypt fell to 29.8% in January on an annual basis, compared to 33.7% in December. On a monthly basis, the pace of inflation increased to 1.6% from 1.4% in December.

The director of the International Monetary Fund told Al-Sharq that “policy makers in Egypt must focus on inflation ... and a flexible exchange rate for the pound is necessary to absorb shocks.”

During the last two weeks, random pricing of goods prevailed in Egyptian markets in light of the lack of foreign currency for importers, which prompted some sectors to price and sell their products in dollars, such as iron, fertilizers, and fodder.