Negotiations between Egypt and the International Monetary Fund (IMF) are “in continuous progress”, and to be completed “soon”, Jihad Azour, IMF director for the Middle East and North Africa, told Bloomberg Asharq news website on Monday.
This is long-awaited news for Egypt which has been in negotiations for a loan for six months now. The loan is much needed to shore up the deficit in foreign currency sources.
While most observers say the loan would come in the range of $3-5 billion, much less than the sum Egypt needs to shore up the deficit in its foreign currency sources, it will act as a “certificate of quality” for the economy, according to an investment banker who preferred to remain anonymous. This “certificate” would make the country’s credit worthiness and investment appeal better, he said.
With the war in Ukraine causing inflation in food and fuel import bills and driving away foreign portfolio investors who had previously favoured the country’s sovereign offerings, Egypt is in dire need of finding new sources for foreign currency.
In parallel, President Abdel-Fattah Al-Sisi paid a landmark two-day visit to Qatar last week. The visit, the first by an Egyptian president in 12 years, followed Qatari Emir Tamim bin Hamad Al-Thani’s visit to Cairo in June.
Investment and economic cooperation topped Al-Sisi’s agenda in Doha. Qatar has teamed up with the United Arab Emirates and Saudi Arabia and pledged to invest $5 billion in Egypt during Tamim’s visit to Cairo in June.
In an interview with Qatar News Agency (QNA), Al-Sisi said “economic and investment cooperation between Egypt and Qatar is very promising and I hope this will translate on the ground into joint investments, particularly in natural gas, green hydrogen, and petrochemicals, and reinforce cooperation between the Sovereign Fund of Egypt (SFE) and the Qatar Investment Authority (QIA).” Agricultural projects between Egypt and Qatar are also in the pipeline.
Presidential Spokesman Bassam Radi said that during the visit Al-Sisi met with the Qatari Businessmen Association and the Qatari Chamber of Commerce and three agreements, covering investment, social affairs, and ports, were signed between the SFE and QIA.
The visit came within the framework of the Egyptian government’s efforts to attract the foreign investment needed to help the country weather the economic crises caused by the Ukraine war, said Ayman Mehasseb, a Wafdist MP and deputy chairman of parliament’s Budget Committee.
“Egypt needs to double foreign exchange revenues and this only happens by moving on multiple fronts, including creating a more attractive investment climate,” argued Mehasseb.
The government is already working to expand private sector participation in the economy. “The current government strategy aims to raise $40 billion over the next four years by selling stakes in state-owned assets to local and foreign investors, particularly from the Gulf,” he said.
“We are witnessing greater involvement from the Saudi and UAE sovereign funds as they buy stakes in Egyptian companies, and they are now being joined by Qatar.”
A Qatari business delegation led by Faisal bin Thani Al-Thani, head of Asia-Pacific and Africa investments at QIA, visited Egypt this week. Prime Minister Mustafa Madbouli met the delegation on Saturday, saying that its visit lent momentum to economic cooperation between Egypt and Qatar. Al-Thani said QIA is interested in investments in the tourism and hotel sectors. Al-Thani also met with Minister of Transport Kamel Al-Wazir.
Fakhri Al-Fiqi, head of parliament’s Budget Committee, noted that the government is also keen to increase foreign exchange revenues from tourism and revealed that the Central Bank of Egypt (CBE) plans to link Russia’s MIR electronic card payment system with Egypt’s domestic Meeza card network before the end of this month.
While implementing MIR across Egypt’s commercial and industrial activities, the most immediate impact is likely to be on the winter tourism season, with the CBE hoping it will facilitate the return of Russian tourists to Egypt’s Red Sea resorts, said Al-Fiqi.
“Several countries like Iran, Turkey, Bahrain, and Armenia have recently decided to adopt the MIR in order to maintain trade links with Russia,” he noted.
Nora Ali, head of parliament’s Tourism Committee, said adopting MIR will involve adding the Russian ruble to the list of currencies used by Egyptian banks and tourism companies.
“The move will allow Russian tourists to return to Red Sea resorts and help the tourism sector regain its position as a major source of hard currency,” she said.
Russia’s Ambassador to Egypt Georgy Borisenko said on Saturday that Moscow has been actively attempting to expand the number of countries that pay via MIR cards after Russia was excluded from the international SWIFT system as part of sanctions imposed in response to the Russia-Ukraine war.
While visiting the Red Sea resort of Sharm El-Sheikh to review preparations for November’s COP27, Prime Minister Madbouli said Egypt is working to raise tourism revenues from $12 billion annually to $30 billion in the next three years and that “restoring the tourism sector to its role as a major hard currency earner will be high on the agenda of the economic conference proposed by President Abdel-Fattah Al-Sisi for the end of this month.”
Following the outbreak of the war in Ukraine, Madbouli’s government imposed restrictions on imports in a bid to reduce the demand for dollars, a policy that “managed to stem the shrinkage in dollar reserves in August”, according to Al-Fiqi.
On Saturday, Madbouli said covering importers’ dollar needs, the need for letters of credit and liberalising the exchange rate will be high on the agenda of the economic conference proposed for the end of the month.
The government has already adopted a more flexible exchange rate, with the Egyptian pound losing more than 20 per cent of its value against the dollar since February, noted Al-Fiqi.
The CBE’s Monetary Policy Committee is due to hold a meeting today. The jury is out over possible changes to interest rates and whether or not it will opt for a further devaluation of the Egyptian pound.
*A version of this article appears in print in the 22 September, 2022 edition of Al-Ahram Weekly.