Egypt races to meet IMF requirements ahead of September scheduled review

Muhammed Khalid , Thursday 7 Sep 2023

As the second review of the International Monetary Fund's (IMF) $3 billion loan agreement with Egypt draws nearer, many concerns are raised regarding the progress of the programme.

The Capital Of Egypt. Photo: zevana / Shutterstock
The Capital Of Egypt. Photo: zevana / Shutterstock


The second review is scheduled for mid-September, however the first review still has not been conducted since its postponement in March.

"I expect the first and second reviews to be conducted ahead of the 2023 Annual Meetings of the World Bank Group and IMF in Morocco on 8 October," economist Hany Abul-Fotouh told Ahram Online.

"The IMF requires more serious steps from Egypt with regard to the reform programme; the postponement of the reviews won't be healthy for the Egyptian economy," added Abul-Fotouh.

The Egyptian government plans to offer stakes in 35 state-owned companies to strategic investors by the end of June 2024, under the State Ownership Policy Document. The programme has collected $5 billion to date, with another $5 billion in deals in the pipeline.

"The government's IPO is progressing slowly and exchange rate reforms are even slower," stated Mohamed Hassan, investment funds director at Odin Investments.

"However, the government is taking big steps in privatization and more huge deals in lucrative state-owned companies are on the way," Hassan said.

The IMF has demanded significant progress on Egypt's IPO programme and a devaluation of the country's currency.

On that front, Abul-Fotouh and Hassan both expect the government to devalue the currency in the coming period, despite the impact of recent successive waves of inflation on Egyptians.

It is worth noting that the Egyptian pound's exchange rate against the USD has fluctuated frequently since March 2022, on the heels of the Russian-Ukrainian war.

The USD/EGP rate jumped from EGP 15.7 to EGP 18.56 in March 2022, then moved gradually to EGP 19.66 until 28 October, when it surged to EGP 23.15. By March 2023, the USD stood at about EGP 30.9, where it remains until today.

"Another movement in the exchange rate of the pound will further burden Egypt's budget with inflated import costs. Therefore, the IMF's review in September may be postponed," banking expert Mohamed El-Beih told Ahram Online.

According to official data, Egypt’s headline annual inflation rate kept its upturn in July 2023 to hit a new record, jumping to 38.2 percent, up from 14.6 percent recorded in the same month of 2022. Inflation is expected to average 32.3 percent in 2023, after averages of 5.2 percent and 5 percent in 2021 and 2020.

"The Central Bank of Egypt (CBE) needs to collect enough hard currency before implementing another devaluation to control the foreign exchange market," added El-Beih.

Egypt's budget deficit accounted for six percent of its GDP in FY2022/2023. The country's debt-to-GDP ratio was estimated at 95.6 percent for FY2022/2023. GDP stood at EGP 9.8 trillion ($318.23 billion) that year. 

"If the government achieved more progress in the IPO program and secured more financing from the Gulf states or from other partners, the CBE would adopt a more flexible exchange rate policy," El-Beih predicted.

Egypt's foreign currency reserves reached $34.87 billion in July, slightly higher from $34.8 billion in June.

According to CBE's data, the country's net foreign assets deficit reached $26.34 billion in July 2023. The net foreign asset deficit is the net total value of foreign assets owned by the country's banks minus their foreign liabilities.

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