Hollar made these remarks during the press conference the IMF held virtually to brief on the IMF’s latest announcement concerning the completion of Egypt’s Extended Fund Facility (EFF) loan and the IMF’s approval of a new $1.3 loan package for the country under the Resilience and Sustainability Facility (RSF).
Recent data shows that Egypt's debt levels and inflation rates have decreased, which are key indicators of economic stability. In February 2024, inflation dropped significantly, mainly due to the fading impact of last year's economic fluctuations.
Hollar noted that, for debt dynamics, continued fiscal consolidation, alongside effective debt management strategies, has contributed to a downward trend in debt. This asserts that the Ministry of Finance’s strategic use of divestment proceeds is also instrumental in reducing debt burdens and meeting financing needs.
Rapid Financing Instrument (RFI) details
On the expected mechanism of the RSF loan programme and its details, Hollar explained that the $1.3 billion RSF access is for the entire arrangement, which is planned to last until the fall of 2026.
“RSF works slightly differently, not in the exact same tranching that the EFF programme is delivered, but it is dispersed in in pieces, and it is linked to the implementation of reform measures. So, the current RSF arrangement for Egypt has 10 reform measures. Each reform measure associated with 1/10 of the overall size of the disbursement. And so, there is a schedule for the targeted date for implementing those measures,” Hollar said.
According to Hollar, the schedule of the reviews under the RSF depends on completing the reform measures (RMs). She also noted that the disbursement is 1/10 per RM of the programme’s overall size.
EFF’s 4th review mechanism
Ahram Online asked Hollar about the commitments under the fourth review that Egypt has met and others unmet. In this regard, Holler said that the IMF’s Executive Board evaluated quantitative commitments and structural benchmarks.
“Although Egypt met nearly all quantitative criteria, two were unmet, necessitating a waiver process. The board's decision to proceed with the review reflects confidence in Egypt's structural reform agenda, particularly in tax reforms, competition framework, and the governance of state-owned banks,” Hollar said.
On tax reform, Hollar highlighted the recent submission of a tax package to the House of Representatives. For the competition framework, she praised the enhancements made to the independence of the Egyptian Competition Authority.
Regarding the governance of state-owned banks, Hollar commended the initiatives taken to ensure adherence to best practices in governance.
Fourth tranche disbursement details
According to Hollar, the $1.2 billion tranche will be disbursed in March following the board's approval.
Key objectives of exchange rate flexibility
Hollar noted that the primary goal of adopting an inflation-targeting regime alongside exchange rate flexibility is to prevent the accumulation of economic imbalances.
This approach aims to avoid foreign exchange rationing by ensuring that foreign currency remains accessible for trade and investment. Moreover, it seeks to prevent large devaluations by mitigating the disruptive effects of sudden currency shifts.
“By allowing the exchange rate to adjust according to market forces, upward and downward movements can occur in response to changes in supply and demand for foreign currency,” according to Hollar.
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