Egypt, IMF in 'serious' negotiations over $5-7 billion loan: Head of parliament’s Budget Committee

Gamal Essam El-Din , Monday 1 Aug 2022

The current negotiations between the Egyptian government and the International Monetary Fund (IMF) over a new loan are now taking a “serious turn,” Fakhri El-Fiqi, head of Egypt's House of Representatives' Budget Committee, said on Sunday evening.

International Monetary Fund headquarters in Washington D.C. (AFP)


"I think that Egypt and the IMF will be able to reach a new deal on a new loan by the end of this year and as expected by the finance minister, and this will help the country a lot in absorbing the shock of the current global economic crisis triggered by the Russia-Ukraine war," said El-Fiqi.

Earlier on Wednesday, Minister of Finance Mohamed Maait said that talks between Egypt and the IMF on an Egyptian request for a new loan have achieved "great progress," and the government is still working to resolve points of dispute with the international lender.

The minister’s remarks come a day after the IMF had said that Egypt is required to make “decisive progress” on fiscal and structural reforms.

In an interview with Al-Hayah Al-Youm TV on Sunday night, El-Fiqi said that Egypt and the IMF experts are now trying to reach an understanding about three crucial issues related to "flexibility of the exchange rate, subsidies in general and fuel subsidies in particular."

"As far as I know, the IMF also wants the government to take some pre-deal procedures such as facilitating measures on documentary credit and more liberalising of the exchange rate to help meet importers' dollar needs. However, the government complains that there are many who ask to open documentary credit to import unnecessary goods," said El-Fiqi.

"The IMF wants liberalisation of fuel prices, but the government believes that if fuel prices surge high this would increase the prices of all goods in Egypt and would negatively affect individual incomes and social dimensions."

"The IMF experts know that economic conditions differ from one country to another and that they should always take social dimensions into account," said El-Fiqi, adding that "if everything goes well, I think the IMF will finally approve extending a new loan of $5-7 billion to Egypt."

In a new assessment report released on 27 July, the IMF's executive board said "Egypt needs a greater exchange rate variability to help it avoid a build-up of external imbalances."

El-Fiqi, also a former IMF consultant, said "Egypt's negotiations with the IMF over a new loan took a longer time this year because the impact of the world economic crisis is very hard, compared with previous crises like the coronavirus pandemic."

However, El-Fiqi praised the Fund's economic outlook, which left Egypt's growth rate unchanged at 5.9 percent in 2022/23, even though it cut the 2023 outlook to 4.8 percent.  

"While the Fund downgraded world economic growth to 3.2 percent for 2023, it expected that of Egypt will achieve 4.8 percent, and that this is not bad at all, given the fact that surging commodity prices and rising interest rates are exerting tremendous pressure on public finances," said El-Fiqi.

"The IMF's assessment report was also clear in expecting that Egypt will achieve the fourth highest growth rate among the world's global economies in 2023," said El-Fiqi.

"On the other hand, the Fund forecasts that the growth rate will reach 4.6 percent in China, 4 percent in Thailand, 3.7 percent in Saudi Arabia, 3.5 percent in Turkey, 2.2 percent in Australia, and 2.1 percent in South Korea," El-Fiqi said.

"The Fund's figures about economic growth in Egypt in FY 2022/23 go in line with those released by the government," he said.

"The Fund said growth reached 5.9 percent, while the government said during the budget debate in June that it would reach 6 percent despite the challenges of the coronavirus pandemic and the Russia-Ukraine war," said El-Fiqi.

He also argued that "compared to the Middle East and North Africa's economies, Egypt's growth rate is considered the best."

"The Fund's reports about growth rates are marked with neutrality and objectivity, and I think its recent assessment report about the Egyptian economy shows that the government has acted very well in taking preventive monetary measures that helped a lot in protecting the national economy from the disruption of international food and fuel chains and absorbing the shock of their negative impact," said El-Fiqi.

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