IMF Reschedules Egypt’s $8B Loan Review Meeting. Here’s Why.

July 11, 2024

 

The International Monetary Fund (IMF) has postponed its Executive Board meeting to discuss Egypt’s third review under the $8 billion loan program to July 29, as announced by IMF Mission Chief for Egypt, Ivana Holler. Originally scheduled for July 10, the delay has not been further detailed by the IMF.

Meanwhile, the head of the Planning and Budgeting Committee at the Egyptian House of Representatives Fakhri EL Feqi suggested that the postponement aims to allow Egypt to benefit from potential IMF actions, including consideration of reduced lending fees.

An official source within the Egyptian government, speaking on condition of anonymity to Business Monthly, revealed that the postponement was at the request of the Egyptian Cabinet. This delay allows new ministers, particularly those in the economic cluster, time to thoroughly review all documents related to completing the third review.

Approval of this review would unlock $820 million as the third tranche of the loan. Initially set at $3 billion, the loan amount was increased to $8 billion in response to Egypt’s request to mitigate the economic impact of regional tensions.

It’s noteworthy that Hassan Abdalla, the Governor of the Central Bank of Egypt, currently represents Egypt as Governor at the IMF, with Ahmed Kouchouk, the Minister of Finance, acting as the sub-governor. Both officials are responsible for signing all documents pertaining to Egypt’s commitments on fiscal and monetary policies as part of required technical procedures.

Prior to this development, Prime Minister Mostafa Madbouly convened with the new Cabinet during the government’s weekly meeting on July 9. Following the session, Madbouly addressed the press, outlining the government’s plan to gradually increase prices for fuel, electricity, and medications to achieve its fiscal consolidation goals.

Regarding concerns about potential delays similar to those experienced during the first and second reviews of the program, the source clarified that such a scenario is unlikely. This is because the third review is already scheduled on the Executive Board’s meetings calendar, unlike the delays that occurred in the first and second reviews, which took over a year to receive IMF approval on the loan, finalized in December 2022.

He also emphasized that the IMF needs to review the Cabinet’s three-year program, which the Prime Minister submitted to Parliament this week, to ensure alignment with Egypt’s commitments under the loan program.

In early June, the IMF announced that its mission staff had reached a staff-level agreement on a set of policies and reforms necessary to complete the third review of the loan program. These policies include enhancing the role of the private sector in the economy, continuing subsidy reforms, maintaining fiscal consolidation measures, tightening monetary policy, and accelerating the implementation of the State Ownership Policy.