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Egypt is close to reaching an agreement with… International Monetary Fund To expand the rescue program, which currently amounts to $3 billion, to $6 billion, according to Bloomberg, citing sources whose identity was not disclosed upon request.
The sources did not rule out that what Egypt will borrow will exceed $6 billion, while other multilateral partners may provide new financing.
According to Bloomberg, it is not clear whether concluding the agreement will take weeks or months, but it considered it a boost for the Egyptian president Abdel Fattah Sisiwho recently won the presidential elections for a third term.
under pressure
According to a report broadcast by Reuters today, the continued deterioration of the economy puts Egypt under pressure to take long-awaited measures following the presidential elections, most notably devaluing the currency and raising interest rates, in addition to accelerating sales of government assets.
Analysts believe that the government postponed the painful steps until after Sisi won the presidential elections for a new six-year term. According to the agency, the focus is now shifting to how to deal with the overvalued currencyInflation Near-record and enormous debts, both domestic and foreign.
Simon Williams of HSBC said that there are many big choices that the government must make, but a reliable currency is the key to achieving a real economic recovery, as quoted by Reuters.
The dollar was worth 29 pounds in the parallel market a year ago, and is now selling for more than 50 pounds, compared to the official price of 30.85 pounds.
Forward foreign exchange rates forecasting the pound’s position in late January see it at 35 pounds to the dollar, while those looking ahead to next year put it at nearly 50 pounds.
Uncertainty about exchange rates prompted Egyptians abroad to refrain from transferring their money back home, which hit one of the main sources of foreign exchange, and remittances fell by about $10 billion to $22 billion during the 12 months until the end of June 2023.
The authorities have implemented 3 sharp devaluations of the currency since early 2022, but each time they returned to stabilizing the price despite pledges made to the International Monetary Fund to switch to a permanently flexible system.
Debt burden
A financial package worth $3 billion that was reached with the IMF a year ago faltered due to Egypt not allowing its currency to float or making progress in the file of selling state assets, and the Fund postponed the disbursement of about $700 million due in 2023.
However, the Fund said – this month – that it was in talks to expand the package due to the economic risks resulting from Israel’s war on Gaza, and it appears to have shifted its focus from the exchange rate to inflation targeting.
“Our focus is on making the economy work as well as possible,” IMF Director Kristalina Georgieva said earlier this month. “In that sense, yes, we prioritize fighting inflation and then of course we will look at the exchange rate in that context.”
IMF spokeswoman Julie Kozak later said that Egypt’s program includes the need to tighten monetary and fiscal policy, along with a flexible exchange rate regime, “to gradually move to an inflation targeting regime.”
Dollar flows face new threats after the impact of the aggression on… Gaza strip On tourism and attacks on ships in the Red Sea, which prevent some of them from sailing through Suez CanalAccording to its central bank data, Egypt achieved revenues amounting to $13.6 billion from tourism and $8.8 billion from Suez Canal fees in the fiscal year 2022-2023.
Egypt needs the dollar to repay its medium- and long-term general external debt, which jumped by $8.4 billion in the six months until July 1 to $189.7 billion, and at least $42.26 billion of external debt is scheduled to be repaid in 2024.
Last January, the IMF estimated Egypt’s financing deficit over 46 months at about $17 billion.
