Moubarak was speaking during a webinar held on Tuesday by BMI, a subsidiary of Fitch Solutions, discussing key macro themes in the MENA region for 2024.

“If the IMF increases the funding allocated to Egypt from the current level of 5.9 percent times its quota to 10 times matching that of Argentina, the Fund's direct funding to Egypt would reach about $8 billion, Moubarak explained.

She also expected some funding from bilateral sources, including the European Union (EU), to finance development projects aimed at creating jobs and reducing migration.

Moreover, Moubarak expected Egypt to reach a deal with the IMF on new financing in the first half of 2024.

The deal, she noted, will facilitate access to bilateral and multilateral funding that – along with the authorities' efforts to diversify the nature of debt issuance – will help the government finance its maturing debt.

However, this will be at the expense of higher debt to GDP level, which will touch around 100 percent, she added.

“We don't rule out new deposits the Central Bank of Egypt will secure from regional allies as well”, Moubarak noted.

On the IMF outlook for the country’s currency in light of its commitments under the ongoing $3 billion program, Moubarak predicted that the Fund will demonstrate flexibility toward the Egyptian authorities in this respect.

The IMF, she explained, will take into consideration the implications of Israel's war in Gaza on Egypt’s economy as well as the Red Sea navigation disruption amid the current tensions and its spillover into the Suez Canal.

“Given this context, and as I said … [with Egypt’s] geopolitical and political importance, we think that the Fund will waive the requirement of a flexible exchange rate. We also expect that a significant share of the funds will be dispersed immediately.

“When we say it will waive the requirements of a flexible exchange rate, this means the currency will still be adjusted. And we see that happening in late March 2024, or early second quarter of 2024 (April-June)”, added Moubarak.

By then, as Moubarak expected, Egypt’s inflation will be slower, touching mid-20 percent, with the local currency going down to a range of EGP 40-45 per 1 USD. It could also reach EGP 50 per 1 USD, she added.

“Inflation will continue to decelerate until the currency is adjusted. And even with increases in administered prices, and even if authorities devalue the currency, inflation will remain closer to 30 percent, well below the peak of 38 percent reached in September”, Moubarak clarified.

On Egypt’s monetary policy, Moubarak projected the Central Bank of Egypt (CBE) to hike the key interest rates by three percent (300 bps) during the first half of 2024 to support the local currency and contain inflation.

Addressing the external position of the hydrocarbon importers, MENA Country Risk Analyst at BMI, Mariette Kas-Hanna, said that this group, excluding Israel for its surplus, is likely to experience a growth in its current account deficit.

This, Hanna, is due to weaker growth in key trading partners that will weigh on export demand and, in some cases, on remittance inflows.

“Egypt and Tunisia will be specifically problematic given their large external financing needs in 2024. And as the two countries have yet to secure an agreement with the IMF that will help them unlock foreign financial support”, Hanna explained.

Hanna also added that the majority of oil importers will post a wider fiscal deficit.

“In Egypt, a weaker currency and higher debt servicing costs will widen the deficit”, she said.

On a regional level, BMI expects MENA’s inflation to decelerate from 10.6 percent in 2023 to 8.4 percent in 2024, driven mainly by the tight monetary policy, especially in the first half of 2024, and a decrease in global food prices, which offset slightly higher oil prices.

“However, the picture varies across the region. Egypt, Iran and Lebanon are poised to see the most significant easing of inflation, yet they will continue to face high rates of price growth of inflation, with Egypt and Iran grappling with double-digit inflation while Lebanon [to keep grappling] with triple-digit inflation.

“Foreseeing devaluation of the pound in the first quarter and an increase in administered prices will keep inflation elevated, but thanks to base effects from previous evaluations, inflation should not hit the peaks of 2023”, said Moubarak.

BMI’s experts also shed light on the global developments that will affect the MENA region in 2024.

According to Moubarak, MENA key trading partners will see either an economic slowdown or subdued growth in 2024.

“We expect the US economy will slow from 2.3 percent in 2023 to 1.4 percent in 2024, and the slowdown will be more pronounced in the second half of 2024 because of the lags associated with higher interest rate hikes, still tight credit conditions, and fading fiscal and post-pandemic tailwinds”, Moubarak explained.

She also expected a 40 percent probability that the US Federal Reserve will start easing its monetary policy by mid-2024. She a one percent (100 bps) reduction in the benchmark interest rates in 2024 in response to weaker macro data, which means that the rate will end the year at 4.5 percent.