A delegation from the International Monetary Fund (IMF) was in Egypt to engage in talks that may surpass $10 billion in assistance for the Egyptian government.
As the IMF were in talks with the Egyptian government, the monetary policy committee of the Egyptian central bank also hiked the country’s benchmark interest rate by 200 basis points to 22.25% for lending and 21.25% for deposits.
A move that surprised economic analysts and is targeted at dropping the country’s inflation rate of 34%.
The proposed $10 billion arrangement is an increase from the 46-month $3 billion Extended Fund Facility (EFF) the IMF had approved for Egypt in December 2022.
As part of the EFF, the Egyptian government was expected to shift to a flexible exchange rate regime, as well as craft monetary policies to drop its inflation rate.
Part of the conditions for the $3 billion IMF loan included raising Egypt’s net international reserves to $6 billion by June 2023 and floating the Egyptian Pound exchange rate.
However, the second tranche of the loan worth $354 million has been paused, as the country failed to implement the agreed conditions.
Speaking on the new deal with Egypt, IMF’s Managing Director, Kristalina Georgieva noted to reporters,
- “We are in this very last stretch, where we are working on the details of implementation. We are very close; we’re not talking about a long-protracted period at all.”
The leader of the IMF team to Egypt, Ivanna Vladkova Hollar, noted to reporters,
- “The IMF team and the Egyptian authorities made excellent progress on the discussions of a comprehensive policy package needed to reach a Staff Level Agreement (SLA) for the combined first and second reviews of Egypt’s economic reform program supported by the IMF.”
What you should know
Since early 2022, the Egyptian Pound has been devalued three times by the government, however, it was last devalued to 30.9 EGP to a USD in March 2023.
However, according to Bloomberg, the parallel market rates of the Egyptian Pound were selling between 65 and 70 EGP/US$. A signification of the shortage of FX in Egypt.
As part of the talks for the new arrangement, it is unknown whether the floatation of the Egyptian Pound is part of the condition
According to Kristina Georgieva, the talks with Egypt are crucial due to the country’s role in the Middle East.
