IMF eases conditions for Egypt

Egypt and the IMF agreed on a package in 2022, but the fund has repeatedly delayed disbursements on the grounds that Egypt has not met conditions, especially commitment to exchange rate flexibility. This new review involves relaxing some of the fund’s criteria.

The latest review, which was approved in late July but only made public late last night, is Egypt’s third, and came after the size of the package was increased in March. The IMF conducts two reviews a year before disbursing funds.

The fund agreed to postpone the publication of annual audits of the financial accounts issued by the Central Auditing Organization until the end of November instead of the original date of the end of March, pending amendment of the law governing the work of the organization.

The preparation of the central bank’s recapitalization plan, which was due to be prepared at the end of April, was allowed to be postponed until the end of August, to give the authorities more time to estimate the amount of new capital required and develop an appropriate strategy.

The fund said Egypt could forgo quarterly fuel price hikes in exchange for a firm commitment to raise prices to “cost-recovery levels” by the end of 2025.

The IMF board was originally scheduled to approve the review on July 11, but postponed its meeting to July 29, four days after Egypt raised fuel prices by up to 15%.

“Restoring energy prices to cost recovery levels, including retail fuel prices, by December 2025 is essential to support the smooth supply of energy to the population and reduce imbalances in the sector,” he said in the review.

The Fund indicated in its statement approving the availability of the third tranche late last July that “inflationary pressures are gradually receding, the foreign exchange deficit has been eliminated, and fiscal goals have been achieved,” including goals related to spending through large infrastructure projects.

“While we have made progress on some critical structural reforms, we need greater efforts to implement the state ownership policy,” he added.

The Fund called on Egypt to accelerate the divestment program from state-owned companies and implement reforms to prevent them from using unfair competitive practices.

Source: Agencies