Egypt is in talks with the International Monitory Fund (IMF) about a new one-year financial assistance deal along with technical support as a proactive step against the economic fallout from the coronavirus outbreak, Egypt’s prime minister and central bank governor said on Sunday.

 

The decision is aimed at preserving the gains of Egypt’s economic reforms, Prime Minister Mostafa Madbouly told a televised press conference. The reforms were tied to a three-year, $12 billion bailout program with the IMF agreed upon in late 2016.

 

“Over the past few days, [we] developed negotiations with the IMF for the new proposed cooperation program to include a financial package alongside technical support,” Mabouly said.

 

The move is a “proactive step” and a precautionary measure against any potential repercussions on the Egyptian economy and is meant to protect the country’s foreign reserves as the crisis has brought major industries like tourism and aviation to a standstill, he said.

 

The government and the IMF will discuss steps to obtain the new funding within the next few days, the prime minister said.

 

Egypt is requesting the funds under the IMF's Rapid Financing Instrument (RFI) and a Stand-By Arrangement (SBA), a statement by IMF Managing Director Kristalina Georgieva said.

 

The emergency financing under the RFI will allow the government to address any immediate balance of payments needs, while an SBA would support the country's macroeconomic policies, she added. 

 

She said she expects the request for the RFI to be presented to the IMF’s Executive Board "within the next few weeks.” 

 

Egypt said in February, before the advent of the coronavirus in the country, that it was in talks with the Fund about technical assistance on non-financial structural reforms. The prime minister said the country's economic situation was “very good” and there was no need for financial assistance before the crisis.

 

He assured the public that the Egyptian economy nevertheless remains steadfast in the face of the slowdown caused by the global pandemic.

 

The IMF is “very enthusiastic” about the program due to the “high credibility of the Egyptian economy,” central bank governor Tarek Amer told the joint news conference.

 

“This program is for one year only, but we can also benefit from other financings,” Amer said.

 

The central bank governor stressed that Egypt has sufficient foreign reserves to deal with the effects of the coronavirus crisis for one or two years.

 

“We have foreign reserves much more than our needs.”

 

The IMF-backed reforms Egypt has pressed ahead with over the past years included devaluing the currency by around half, cutting energy subsidies and introducing a value-added tax. The changes have further strained the budgets of millions of Egyptians.

 

Egypt expects economic growth to slow to 4.2 percent in the current 2019/2020 fiscal year, ending in June, due to the effects of the coronavirus, Planning Minister Hala El-Saeed said in the same briefing.