IMF reschedules Egypt loan 3rd review discussion meeting to 29 July: Mission chief

Doaa A.Moneim , Tuesday 9 Jul 2024

The International Monetary Fund (IMF) has rescheduled its Executive Board meeting to discuss the third review of Egypt’s ongoing Extended Fund Facility (EFF) $8 billion loan programme to 29 July, IMF’s Mission Chief for Egypt Ivanna Vladkova Hollar told Ahram Online on Tuesday.

File photo: The International Monetary Fund headquarters in Washington D.C. AFP
File photo: The International Monetary Fund headquarters in Washington D.C. AFP


The third review was originally scheduled for Wednesday, 10 July.

In April, Hollar told Ahram Online in an interview upon the completion of the first and second reviews of the loan programme that the fund was expected to complete the third review by the end of June.

However, the IMF had initially scheduled its executive board meeting for Egypt on 10 July, which has now been postponed.

According to an official source who spoke to Ahram Online, the IMF normally takes such actions in the case of a cabinet change.

Last week, Egypt announced a cabinet overhaul, including comprehensive change in the economic cluster. Within the cabinet reshuffle, Ahmed Khouchouk became the Minister of Finance, succeeding Mohamed Maait.

The Governor of the Central Bank of Egypt is Egypt's Governor at the IMF, while the Minister of Finance is the sub-governor at the global lender.

“The letter of intent that governs the monetary and fiscal policies Egypt is committed to under each review must be signed by the Governor of the Central Bank and his deputy. In the case of Egypt, I think the government had asked the IMF to have time before completing the review to revisit the pledges Egypt has committed, as well as to have the signature of the new finance minister on the letter of intent,” the source explained to Ahram Online.

“It is just a technical issue”, the source added.

Former Assistant Director at the IMF Khaled Sakr clarified to Ahram Online that such postponements are typical when there is a recent change in government in any country that has a programme with the Fund.

“This is required to allow the new cabinet to reaffirm the original reform plans or to amend some details based on its vision”, according to Sakr.

He added that there is also a procedural issue as the government’s letter of intent is co-signed by the finance minister and thus the government usually needs to prepare and send to the Fund a new letter with the signature of the new minister. 

When asked if this action could be a repetition of the first and second review scenarios, Sakr said that the postponement is likely short and seems sufficient to distribute the new letter of intent and any consequently amended staff report to the IMF's Executive Board.

“The Board typically requires two to three weeks to study the documents before holding the meeting. The Fund would specify a new date only when there is a substantial degree of confidence in the national reform plans,” he explained.

“It is well to note that both the presidential directions to the cabinet and the prime minister’s remarks have reaffirmed Egypt’s intentions to advance reforms while, rightly, mitigating any short-term impact on the poor”, Sakr continued.

He added that the new finance minister has an excellent reputation and is very capable of striking the right balances in this regard.

Minister Khouchouk is also very knowledgeable and aware of the unintended negative side effects of overspending on inflation rates, exchange rates, growth and job creation objectives, Sakr pointed out.

He also noted that Kouchouk’s public statement upon his appointment highlighted the need to adhere to fiscal discipline and debt reduction.

“Placing him at the helm of this important ministry has led to an immediate reduction in Egypt’s foreign debt spread, which means lowering the public debt service bill that the government, and ultimately, the citizens have to bear”, according to Sakr.

Sakr expressed his hope that Kouchouk will garner support from all ministries and public entities in his effort to curb spending and borrowing.

He also underlined the need to prioritize the long list of government objectives in line with available resources to avoid a setback in the progress made thus far in decelerating inflation and stabilizing the exchange rate.

Once the third review is completed, Egypt will receive $820 million in a third tranche of the loan.

In March, the IMF approved the Egyptian government’s request to raise the value of the loan by $5 billion in response to the implications of the regional tensions on the country’s economy.

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