IMF mission concludes Cairo visit, reports progress in talks with Egyptian authorities
The International Monetary Fund (IMF) mission concluded its visit to Cairo last Thursday, announcing progress in discussions with Egyptian authorities. The mission will continue virtual meetings to determine the necessary additional support to fill the growing financing gap in the country, according to Bloomberg.
In a statement released by the mission, the IMF team and Egyptian authorities achieved "excellent progress in discussions on the comprehensive policy package required to reach an agreement at the expert level for the first and second combined reviews of the Economic Reform Program in Egypt, supported by the Fund."
The IMF had postponed reviews of Egypt's current program, agreed upon over a year ago, awaiting authorities to allow a more flexible exchange rate and fulfill other commitments before disbursing further funds.
According to the IMF statement, the visit, led by Ivanna Vladkova Hollar from January 17 to February 1, involved discussions toward completing the first and second reviews of the reform program supported by the Extended Fund Facility (EFF).
The mission reached an agreement with Egyptian officials on the "key policy elements of the program," and the authorities "expressed strong commitment to immediate action on all important aspects of the economic reform program."
Highlighting some progress made by Egypt in achieving certain program objectives with the IMF, the Cabinet approved on Wednesday a proposal to reduce government capital spending and halt new (government) projects until at least July. Additionally, last Thursday, the Central Bank raised interest rates by 200 basis points in its first meetings for the current year.
The IMF statement did not specify the value of the financial support discussed, but sources mentioned yesterday that Cairo is negotiating an increase in its current program, valued at $3 billion. Only a small portion has been disbursed so far, as part of a broader package that may also involve the World Bank, and talks with the IMF are expected to bring partners and funding exceeding $10 billion.
During a press conference in Washington, IMF Managing Director Kristalina Georgieva stated that working with Egypt is an absolute priority because it is crucial in this regional context that has become more challenging.
According to the IMF statement, The IMF team and Egyptian authorities also agreed on the critical importance of enhancing social spending to protect vulnerable groups. This is important to ensure suitable living conditions for low- and middle-income families that have been severely affected by price hikes.
The mission and officials in Egypt are set to continue discussions online in the coming days to finalize the economic and financial policy memorandum, and determine the necessary additional support from the International Monetary Fund and other bilateral and multilateral development partners to help fill the increasing financing gaps in Egypt in the context of recent shocks.