CAIRO - 12 February 2024: “Working with Egypt is a high priority for the International Monetary Fund (IMF),” the IMF Managing Director, Kristalina Georgieva stated on Monday.
Georgieva added in a tweet via X platform that they have made significant progress in our discussions of a comprehensive policy package needed to complete the first and second reviews of Egypt’s economic reform program.
This came during her meeting with Egypt’s Prime Minister, Mostafa Madbouly, on the sidelines of the World Government Summit in Dubai.
Georgieva participates in the 2024 World Government Summit, themed "Shaping Future Governments," which commenced earlier Monday in Dubai. The summit, running until February 14th, involves the participation of over 25 heads of state and government.
On Sunday, the International Monetary Fund (IMF) Managing Director, Kristalina Georgieva, revealed in an interview with Asharq Business that the anticipated increase in support to Egypt will be of "significant size."
The IMF team has reached the final stages to complete the first and second reviews of Egypt's program "within a few weeks”, according to Georgieva.
The IMF mission concluded its visit to Cairo in early February, announcing progress in discussions with Egyptian authorities. Virtual meetings will continue to determine the necessary additional support to fill the growing financing gap in the country.
These talks come at a time when the Egyptian economy faces a severe crisis due to a sharp shortage of dollar liquidity, an increase in the gap between the official exchange rate of the pound and the parallel market rate, and a decline in remittances from abroad and exports. These challenges are exacerbated by geopolitical tensions in the region.
Georgieva emphasized in her interview with Asharq Business on the sidelines of the World Government Summit in Dubai that the IMF seeks "to instill confidence in the Egyptian economy by adjusting the size of the support program." She added, "We have identified the financing gap in Egypt, and we will announce it after completing the negotiations."
The IMF had postponed the two reviews of Egypt's current program, agreed upon over a year ago, awaiting authorities to allow a more flexible exchange rate and fulfill other promises before receiving additional funds. Georgieva affirmed today that the discussion with Egypt is about a flexible exchange rate and not "floatation."
Reaching an agreement with the IMF and development partners would contribute to lifting Egypt out of its worst economic crisis in decades, especially with the urgent need for economic stability in the face of Israel's war on neighboring Gaza.
"Egypt needs to commit to certain matters, including scheduling ongoing major projects... The situation in Gaza has put pressure on Egypt, including the government's offerings program. We want Egypt to sell at the right time, and we do not want the government to rush to sell shares in government companies under the current conditions,” Georgieva stated in her interview with Asharq Business.
To provide dollar liquidity, Egypt has recently worked on selling some of its assets to investors, successfully raising up to $3.1 billion since March 2023 when the government companies' offerings program was launched. This followed $2.5 billion raised by divesting from government assets in 2022.
The IMF Managing Director told Asharq Business that "Egyptian policymakers need to focus on inflation... and a flexible exchange rate for the pound is necessary to absorb shocks."
In the past two weeks, arbitrary pricing has dominated the Egyptian markets due to the unavailability of hard currency for importers, leading some sectors to price and sell their products in dollars, such as iron, fertilizers, and animal feed.
In a related context, Georgieva stated that external shocks have prompted Egypt to take strong measures to rebuild the economy, and the IMF "looks at Egypt's ability to reduce inflation, and this takes priority in our program. We look at how Egypt can be more flexible."
She emphasized, in press statements, that a flexible exchange rate brings stability to the country. She wants to protect Egypt from inflation, establish social protection to safeguard vulnerable individuals and the middle class, and added, "It is essential to fully and more flexibly regain economic capacity - we focus on making the private sector a source of growth that contributes to job creation."