IMF to complete 3rd review of Egypt $8 bln loan by end June, last review by 2026: Mission chief

Doaa A.Moneim , Monday 1 Apr 2024

The International Monetary Fund (IMF) is scheduled to complete its third review of Egypt's $8 billion loan deal by the end of June, and its last review by 2026, the IMF’s Mission Chief to Egypt Ivanna Vladkova Hollar announced on Monday.



Hollar made her statements to Ahram Online during a virtual press briefing held by the fund to answer journalists' questions on the latest $8 billion Extended Fund Facility (EFF) loan for Egypt.

The remaining five reviews will take place every six months, with each disbursement programmed to be around $1.3 billion.

The last review is scheduled for the fall of 2026, Hollar said.

“In general, the key consideration concerning the size of the IMF financing trenches is related to the timing and the size of the balance of payments needs or the external financing needs of the member country,” Hollar explained.

She added that Egypt will receive $820 million after completing the first and second reviews under the expanded 46-month $8 billion loan deal,

According to Hollar, the approved financing path considers the timing and availability of other financing to help external pressures.

It also considered that the next review is expected to take place quarterly, which means a similarly sized dispersion is expected by the end of June – subject to the completion of the review conditions.

Hollar affirmed that EFF loan is a longer-term structural reform programme that supports the medium-term needs of the country.

She added that the remaining trenches will support to Egypt’s economic reform programme.

Hollar stated that Egyptian authorities have made a strong economic stabilization plan to correct the current imbalances; some elements of this plan are already under implementation.

“This economic stabilization plan is centred on a liberalized foreign exchange system in the context of a flexible exchange rate regime, a significant tightening of both fiscal and monetary policies to support the adjustment in the exchange rate, and the implementation of reforms that would allow the private sector to become the growth engine,” Hollar explained.

She highlighted the short-term impact of the Ras El-Hekma deal, recently signed with the UAE, on the Egyptian economy.

“The authorities have committed to use a large part of the new financing to improve the level of reserves, fast track the clearance of foreign currency and backlogs in arrears, and reduce government debt upfront. This is the right choice as it would improve its economic outlook faster, enabling it to rely on stronger buffers in the face of future shocks,” Hollar clarified.

Hollar also noted that the designed policies aim to secure macroeconomic stability.

The Central Bank of Egypt (CBE) will focus on reducing inflation and further tightening the monetary policy as a key path to prevent further erosion of the purchasing power of households, she added.

Hollar said implementing the newly established framework to monitor and control broadly defined public investment will help manage excess demand

Moreover, the revenue-based fiscal adjustment will firmly reduce the country’s debt, and provide resources for expanding the social safety net and priority expenditures, including education and health.

“It remains essential to replace untargeted fuel subsidies with targeted social spending. The stage is now set for accelerating implementation of the structural reform agenda intended to deliver inclusive and sustainable growth, withdrawing the state and military from economic activity as per the authority state ownership policy, and ensuring that the public sector firms are not given a competitive advantage over the private sector, which is key to attracting foreign and domestic private investment in Egypt,” Hollar stressed.

She stated that achieving these goals will not be easy, affirming that the IMF will continue to support Egypt in implementing economic policies that best serve the Egyptians.

Furthermore, Hollar said the IMF will launch its projections for Egypt’s key macroeconomic indices concerning the country’s debt in detail in its report that will come out within days.

She added that using resources like the Ras El-Hekma investment deal is important for reducing public debt.

“Immediately, as those resources are made available, and at the same time, the authorities have committed to a fiscal consolidation strategy that is based on raising revenues, specifically from broadening the revenue base, a broader set of economic actors will be contributing to improving the fiscal balance and reducing debt,” she continued.

Thus, the policies under the programme are intended to “put Egypt’s debt on a downward path,” she affirmed.

However, Egypt’s inflation rate will remain high over the short term mainly due to the unification of the exchange rate that fed the price pressure in the local market, she said.

The IMF expects the inflation rate to average 25.5 percent in the upcoming FY2024/2025 and decrease to 15.2 percent by the end of the same fiscal year, due to the tightening of the monetary policy and the appreciation trend of the local currency.

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