First tranche of $3 billion IMF loan will stabilise FX market: Parliament committee head

Gamal Essam El-Din , Wednesday 7 Dec 2022

​Egypt will receive the first tranche of its $3 billion IMF loan immediately after the IMF board meeting on Friday 16 December, or within 10 days, said head of the House's Budget Committee Fakhri El-Fiqi, who affirmed the loan will help shore up the country's foreign currency reserves.



“Egypt got an initial approval from the Fund at the level of experts one month ago, and what will happen on 16 December is that Egypt will get final approval from the Fund's 24-member board of executive directors, after which the first tranche – that is $750 million – will be immediately disbursed,” said El-Fiqi.

El-Fiqi said that the final approval on 16 December would come after Egypt meets all the pre-conditions prescribed by the Fund, and that “it is now up to the Fund's board to give its final approval for the first tranche.”

According to its online executive board meetings calendar, the IMF has scheduled its meeting on Egypt's new loan for 16 December.

The Fund and the Central Bank of Egypt (CBE) are in close coordination over the measures necessary to pave the way for the release of the loan's tranches over the next four years, and not three years, El-Fiqi told parliamentary reporters on Wednesday.

“They both agree that there should be a flexible exchange rate, while the government holds the right to take all social protection measures necessary to contain the negative impact of the pound flotation on poor and limited-income classes, and that the private sector will be a main player in the national economy through the State ownership policy document,” said El-Fiqi.

The Fund, he adds, drew lessons from previous loan deals and that social dimension is key to the success of any economic reforms.

El-Fiqi noted that "the reason why the IMF board took more than one month – between 27 October and 16 December – to look into the first tranche of the loan was because more than 50 countries are currently vying for loans from the Fund.

“They have a busy schedule and so they took some time, but there will be a final approval for disbursing the first tranche on 16 December,” said El-Fiqi.

El-Fiqi said the fact that “the Egyptian government, the CBE and the IMF will remain in close coordination over the coming four years should send a message of confidence in the Egyptian economy to foreign and Arab investors, which will allow Egypt to receive credit facilities from other sources, and this will sure help shore up the country's FX reserves.”

El-Fiqi explained that the Fund's $3 billion loan would be disbursed over four years.

“During this period there will be a quantitative and structural review for the economy every six months, and this means that Egypt's economy will be moving in the right direction in close coordination with IMF officials,” said El-Fiqi.

He revealed that the $3 billion loan will be repaid over 20 years, with a 10-year grace period and a quarter percent as interest rate.

The head of the parliamentary budget committee dismissed rumours that the Egyptian pound is currently trading on the black market at more than EGP 30 per dollar.

“The agreement with the IMF mentioned nothing about a total liberalisation of the pound, but just spoke about a flexible rate of exchange, and so I think that after the release of the first tranche all rumours will subside,” said El-Fiqi, adding that “the CBE's FX reserves are increasing, and not decreasing, and in the end this will help narrow the financing gap and stabilise the exchange rate.”

He also said that Egypt is among 50 countries currently vying for financing from the IMF's newly-created Resilience and Sustainability Facility to help them contain the economic fallout from the war in Ukraine.

“This is a Fund with $40 billion and Egypt is eligible to obtain a tranche from this Fund,” he said, adding that “Egypt can also get financing from other IMF partners like the African Development Bank, the European Bank for Reconstruction and Development Bank and the World Bank.”

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