Once approved, Egypt will receive the third tranche of the loan worth $820 million.

The IMF’s Executive Board meeting will focus on assessing the extent to which Egypt has met its commitments under the programme.

Monetary policy
 

Under this review, Egypt has committed to tightening the monetary policy over the short term to bring the high inflation down to the target the Central Bank of Egypt (CBE) set at seven percent (±2 percent) in the fourth quarter of 2024. This aligns with the major objective of adopting a flexible regime for key interest rates and foreign exchange.

In this respect, Egypt raised the key interest rates by 19 percent (1900 bps) since March 2022, when the country started the loan talks. It has also devalued the Egyptian pound against the US dollar four times, which raised the US dollar rate by over 223 percent against the local currency.

For four consecutive months (April-June), Egypt’s annual headline and core inflation rates have retained a downward path, stabilizing at slightly over 27 percent and 26 percent, respectively.

Meanwhile, Prime Minister Mostafa Madbouly stated in a press conference held in July that the government targets taming inflation to 10 percent in 2025, beyond the CBE’s target.

Furthermore, the government announced last week increasing the price of all fuel products for the second time by up to 15 percent, which came into effect on Thursday. This is expected to feed the inflationary wave the country is already experiencing.

Madbouly also declared that the government plans to gradually raise the prices of all services, including fuel products and electricity bills till the end of December 2025 to alleviate the rise's impact on citizens.

Fiscal policy
 

Moreover, the third review discussion is expected to touch on the progress of the government’s divestment plan and the headway made in containing fiscal risks and the elevated debt and narrowing the budget deficit.

Same criteria of 1st, 2nd reviews
 

The quantitative programme targets for end-March 2024, end-June 2024, and end-December 2024 and indicative targets for end-September 2024 were agreed upon, the IMF revealed in its staff report on the loan programme’s first and second reviews issued in April.

It also explained that the third review is set to be completed based on the criteria of the previous two reviews.

“In addition to existing performance criteria on net international reserves, the primary balance, and non-accumulation of external debt payment arrears, performance criteria are proposed on the government’s overdraft at the CBE and central bank development lending to public sector agencies excluding the Ministry of Finance. New indicative targets are proposed on government guarantees and public investment, including national projects,” according to the report.

$19 bln of Arab deposits at CBE to remain till after IMF loan ends
 

The IMF revealed that assurances from gulf countries have been received that $19 billion of official deposits at the CBE will remain at the CBE until after the expiration of the EFF arrangement in September 2026, with a commitment from the Egyptian side not to use these deposits for the purchase of equities or debt.

Divestment plan is a key issue
 

Along with the finances committed by international financial institutions and the country’s partners, Egypt’s divestment strategy will continue to provide external financing. However, the fund has warned that this will be combined with a more backloaded profile.

“With several GCC partners having publicly communicated their support for Egypt’s reform program, a substantial pipeline of identified state assets, and with smaller financing gaps in the outer years of the Fund-supported program, staff assesses that there are good prospects for the remainder of the arrangement to be fully financed, including through multilateral support, additional external issuances, potential further support from the EU, and larger policy adjustments if needed,” the report added.