IMF Team in Egypt to Review Economic Reform Program

An International Monetary Fund (IMF) spokesman said that a team is currently in Cairo to discuss the first and second reviews of the $3 billion extended fund facility reform program.

According to Bloomberg, Cairo is currently hosting an IMF team led by Ivana Vladkova Hollar, head of the Fund’s mission in Egypt, to continue discussions on the first and second reviews of the reform program.”

In a parallel context, Jihad Azour, Director of the Middle East and Central Asia Department, made a visit to Egypt at the beginning of this week, where the IMF held the annual meeting of the Fund’s local offices for the Middle East, North Africa, Caucasus and Central Asia regions. 

During his visit, Azour also met with Egyptian government officials and a number of regional stakeholders.

The Fund team met with the Minister of Planning and Economic Development, Hala Al-Saeed, the CEO of the Sovereign Fund of Egypt, Ayman Soliman, and a number of ministry officials in a meeting that lasted for several hours in a meeting, during which they learned about the details of the structural reform program and what was accomplished, as well as national accounts and growth rates, and they asked to know the size of the sovereign fund’s expected cash flows from future projects.

During the meeting, the International Monetary Fund team praised the design of the structural reforms program. They also discussed the historic hotel sale deal recently completed by the Egyptian government with the participation of the private sector and the sovereign fund. They asked about the extent of transferring the value of the deal to government accounts and the timing of that, the value of what will enter the public treasury, and what will be paid,including debts.

The Fund team is expected to meet with several ministries in the coming days, most notably Finance, Petroleum, and Transport, as well as the Central Bank Governor.

This comes after Kristalina Georgieva, IMF Director, met with the Egyptian Minister of Finance and Governor of the Central Bank at the IMF headquarters on January 9. 

International Monetary Fund spokeswoman Julie Kozack said this month that the Fund team is in discussions with the government regarding a set of policies that would support the completion of the first and second review of the Extended Financing Facility program.

Kozak identified the main priorities are supporting the government's pledge to reduce inflation and gradually move to an inflation targeting system, as well as “crucial” additional financing to ensure successful implementation of the programme.

Egypt is living in the midst of a difficult economic crisis, exacerbated by geopolitical tensions, in addition to a severe scarcity of its dollar liquidity, due to the decline in remittances from workers abroad, tourism revenues, the Suez Canal, and exports. 

The official exchange rate stands at 30.9 pounds to the dollar in banks, while the gold market price is close to 60 pounds, which increased Egyptians’ demand for safe havens to hedge against brutal inflation, which jumped the price of the yellow metal to levels that the market had never seen before, bringing the price of a gram of 21K to 3,520 pounds.

These conditions prompted Moody's Investors Services to lower its outlook on Egyptian government issues from "stable" to "negative."

Moody's said that even with the expected increase in IMF financing and the government's continued commitment to achieving primary surpluses, the negative outlook reflects "the risks of insufficient monetary policy measures and external support to prevent debt restructuring given Egypt's very weak debt indicators, its high exposure to debt, and the escalation of foreign exchange and interest rates.

In response to Moody's move, the Ministry of Finance said yesterday that the credit rating institution did not take into account the government's current efforts, as the IPO program enhances Egypt's ability to meet financing needs during the next two years, contributes to attracting more investment flows, and reducing the need for external financing, especially in light of the government's work to manage macroeconomic risks flexibly to contain successive external shocks, and deal with balance and extreme caution with the negative effects resulting from geopolitical tensions affecting economic activity.