Goldman Sachs expects Egypt-IMF financial deal to reach $12 bln

Baheya Wael , Sunday 4 Feb 2024

Goldman Sachs, the renowned American investment bank, anticipated that Egypt is on the verge of securing a $12 billion financing deal with the International Monetary Fund (IMF), according to a report by Asharq Bloomberg on their official account on X on Sunday.

IMF
IMF HQ in Washington. Official Website.

 

The report explained that the $12 billion funding would include an estimated distribution of $7 billion from the IMF and $5 billion from external partners.

Goldman Sachs stated that the International Monetary Fund (IMF) has reached a preliminary agreement with Egypt on a new deal that would include completing the delayed first and second reviews for the last program.

According to Asharq Bloomberg, Goldman Sachs’s analysis relies on Egypt’s urgent financial needs over the next four years, driven by the necessity to pay medium and long-term loan instalments.

Goldman Sachs said Egypt needs $8 billion to fulfil its liabilities and another $17 billion to restore foreign exchange market performance and bolster confidence in the Egyptian pound. This means that Egypt needs $25 billion over the next four years.

The bank highlighted the country’s potential, having secured $12 billion, to secure the remaining $13 billion through revenues generated from state asset sales, restructuring future dues in foreign currency, and the return of overseas Egyptians' remittances to previous levels.

These predictions align with recent statements from Kristalina Georgieva, the Managing Director of the IMF, who emphasized the advanced stage of discussions between Egypt and the IMF during her recent visit to Egypt from 22 January to 1 February.

Georgieva acknowledged that Egypt faces complex challenges, including economic repercussions from the COVID-19 pandemic and geopolitical developments in Ukraine, Sudan, and Gaza.

She also underscored Egypt’s significant losses amounting to hundreds of millions of dollars due to decreased Suez Canal revenues amid heightened tensions in the Red Sea.

“This is one of our primary issues: how can we best support Egypt in this difficult time? For the sake of the Egyptian people, no doubt, but also for regional stability,” the IMF chief stressed.

Egypt initially secured a four-year $3 billion Extended Fund Facility (EEF) loan program from the IMF in December 2022. The programme's first and second reviews were delayed due to ongoing challenges resulting from global and regional geopolitical tensions.

On Thursday, the Central Bank of Egypt (CBE) raised key interest rates by two percent (200 bps).

This move could expedite measures for the IMF augmented rescue package and pave the way for another devaluation.

Since March 2022, the Egyptian government has already devalued its currency three times, resulting in a depreciation of around 70 percent against the US dollar, trading at EGP 31 per dollar according to the CBE's official exchange rate.

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