Egypt and the Fund are in the “final stage” of negotiations to increase the loan program

The pound continues to decline against the dollar, as it has lost about 50% of its value since 2022 (Shutterstock)

The International Monetary Fund said in a statement that it had agreed with Egypt on key policy elements of the economic reform program in another indication that a final agreement to increase the country's $3 billion loan is nearing completion.

IMF mission head to Egypt Ivana Vladkova Hollar said the two sides had made “excellent progress” in discussions on a comprehensive policy package that could begin long-awaited reviews of the country’s economic reform program.

“To this end, the IMF team and the Egyptian authorities agreed on the main policy elements of the program,” Hollar added in a statement. “The authorities expressed their strong commitment to moving quickly on all important aspects of Egypt’s economic reform program.”

Final stage

Yesterday, Thursday, IMF Director Kristalina Georgieva said that the Fund and Egypt are in the “final stage” of negotiations to increase the loan program.

Egypt has held talks over the past two weeks with the Fund to revive and expand the loan agreement, which was signed in December 2022.

The Fund suspended the disbursement of loan shares last year after Egypt fixed the exchange rate of the pound against the dollar in March and did not fulfill its pledge to allow market forces to determine its exchange rate.

The exchange rate has been fixed at 30.85 pounds to the dollar since then, while the dollar is trading on the black market at a level of 71 pounds.

Hollar, who concluded a two-week visit to Cairo on Thursday, said that discussions will continue virtually in the coming days “to determine the amount of additional support needed to help fill Egypt’s growing financing gaps from the IMF and other bilateral and multilateral development partners in the context of the most recent shocks.”

Two weeks ago, Bloomberg reported that Egypt was approaching an agreement with the International Monetary Fund to expand the rescue program, which currently amounts to $3 billion, to $6 billion, conveying the news from sources whose identity was not revealed at its request.

According to Bloomberg, it is not clear whether concluding the agreement will take weeks or months, but it is considered a boost for Egyptian President Abdel Fattah El-Sisi, who recently won the presidential elections for a third term.

Egypt seeks to expand the rescue program with the IMF from $3 billion to $6 billion (Al Jazeera)

Bonds rise

Following the agreement between the Fund and Egypt, Egyptian dollar sovereign bonds rose by more than a cent today, Friday.

Tradeweb data showed that notes due in 2027 saw the largest gains, rising 1.2 cents to trade at 77.29 cents to the dollar.

Yesterday, Thursday, the Monetary Policy Committee of the Central Bank of Egypt decided to raise key interest rates by 200 basis points.

The bank said, in a statement published on its website, that it decided to increase the overnight deposit and lending rates and the central bank’s main operation rate by 200 basis points to reach 21.25%, 22.25%, and 21.75, respectively. The credit and discount rates were also raised by 200 basis points to reach 21.758%.

The bank indicated a slowdown in economic activity as a result of the restrictive monetary policies followed by the major central banks on demand. Global inflationary pressures have also decreased recently as a result of restrictive monetary policies followed in many advanced and emerging economies, and accordingly, expectations of inflation rates for those economies have declined compared to what was presented at the previous meeting.

On Wednesday, the Director of the Middle East and Central Asia Department at the International Monetary Fund, Jihad Azour, said that the Fund is ready to raise the value of the financial loan directed to Egypt, if there is a need for that.

Annual inflation growth in Egypt slowed to 35.2% last December, down from 36.4% in the previous November, but prices last January witnessed successive jumps due to the fall of the pound on the black market.

Source: Agencies