Cairo points to progress in loan talks with IMF

Cairo moves ahead with negotiations with the International Monetary Fund (IMF) for a new loan, the fourth since 2016, amid indications that the negotiations are making progress.

Finance Minister Mohamed Maeet expected an agreement to be hammered out with the IMF ‘very soon’.

He said the Egyptian government wants to finalise the loan deal with the international creditor by this December.

Nonetheless, he noted that the two sides had not agreed on the loan value yet.

So far, Egypt has received three loans from the IMF, worth a total of $20 billion, since 2016.

It received $12 billion in 2016 to finance its economic reform programme. Egypt received the second loan, $2.8 billion, in 2020, an amount of money that was used in facing the repercussions of Covid-19.

This loan was supplemented by a third one, worth $5.2 billion, that came under a credit readiness agreement.

The talk in Egypt these days is about the measures Egypt needs to take to ease the disbursement of the new loan, including enhancing the competitiveness of the economy, increasing participation in economic activities by the private sector and restructuring the fuel subsidy system.

Minister of Supply Ali Moselhi assured the members of the public about bread and food subsidies.

“Bread subsidies are untouchable,” a number of local media outlets quoted the minister as saying.

He described food and bread subsidies as a ‘matter of national security’.

Egypt, he said, had allocated an additional LE23 billion (roughly $1.2 billion) to subsidise the bread.

Prime Minister, Moustafa Madbouli, revealed, meanwhile, that negotiations with the IMF have reached their final stage.

The government, he said, provides cash support to 4 million families which comprise between 16 and 20 million citizens, under the Solidarity and Dignity social welfare programme.

The Monetary Policy Committee, the decision-making body of the Central Bank of Egypt, will convene on September 22 to decide the future of the exchange rate.

Head of the Committee on Planning and the Budget in the House of Representatives (lower chamber of parliament), Fakhri al-Fikki, said the exchange rate of the pound is a core issue in negotiations with the IMF.

“Cairo wants to follow managed flotation which keeps the exchange rate under control,” he said.

The IMF had previously said that the Egyptian economy continues to suffer from the burden of high public debts, debt services and financing requirements.

The fund also lowered its forecast for the growth of the Egyptian economy this year to 4.8 per cent, from 5 per cent.

It said Egypt is able to maintain macroeconomic stability, noting that the $5.2 billion loan Egypt obtained in 2020 achieved its objectives.