Moody's expects IMF loan programme for Egypt to increase to $10 bln

Moody’s added that this enhancement is expected to effectively address Egypt's current and upcoming fiscal year's external funding gap.

An IMF mission is presently in Cairo to discuss the first and second reviews of Egypt's reform programme in light of the nation's economic crisis and the prevailing geopolitical tensions.

“The completion of the two reviews, slated to occur within the coming weeks, will be accompanied by specific measures, including the devaluation of the Egyptian pound and the implementation of tighter monetary and fiscal policies to eliminate the currency parallel market,” the report highlighted.

Since March 2022, the Egyptian government has already devalued its currency three times, resulting in a depreciation of around 70 percent against the US dollar, with expectations of a fourth wave of devaluation to occur soon.

Moody's has revised its future outlook on the Egyptian economy from stable to negative, citing the widening disparity between the official exchange rate of the Egyptian pound (EGP) against the US dollar (USD) and the rate prevailing in the parallel market.

In the parallel market, the USD is currently traded for over EGP 60, while the official exchange rate remains nearly EGP 31 per dollar.

This discrepancy has led to a decrease in remittances from Egyptians working abroad, as they seek alternative channels to transfer their savings, Moody's stated.

Remittances from Egyptians working abroad dropped 29.22 percent to $4.52 billion in the first quarter of the fiscal year (FY) 2023/2024 (July-September) from $6.39 billion in the same period of FY2022/2023, according to data released by the planning ministry.

The agency also highlighted the adverse consequences of escalating geopolitical tensions on Egypt's borders, especially the Israeli war on Gaza, which resulted in a decline in both tourism revenues and Suez Canal revenues.