JARVIS INTERVIEW WITH AMAY: The loan will be divided into three tranches, which will be disbursed over six payments, IMF head of mission in Egypt Chris Jarvis told Al Shorouk in an interview carries Friday. The first tranche will be worth a total of USD 4 bn, with the first instalment being worth USD 2.5 bn and a second payment of USD 1.5 bn to follow, Jarvis added. (Elsewhere in the newspaper, a government official told Al Masry Al Youm that the first tranche would be USD 2.5 bn and would arrive in 6-8 weeks.)

Interest on the facility has not been agreed, but should be in the 1.5% range. The first payment will be delivered within weeks of the IMF’s Executive Board approving the agreement. Al Shorouk quotes Jarvis as saying that the board’s deliberations will take into consideration the status of loan agreements with other finance institutions including the World Bank and the African Development Bank.

Speaking on the timeline of the reform program, Jarvis asserted that “devaluation is only months away.” He added that the government has already taken steps to cut energy subsidies and “we are not worried about the implementation timeline. The government wishes to protect the lowest income citizens from the inflationary effects of such a decision, and the IMF can appreciate that,” said Jarvis.

As for the value-added tax, the government will begin enforcing the tax as soon as the House of Representatives approves the legislation, Jarvis said, adding that 14% is an appropriate baseline rate if exemptions are not extensive. Asked whether the IMF felt the exemptions list was too extensive, Jarvis is quoted as saying: “We were never informed of the exemptions list and did not discuss it during the negotiations, but we are confident that the government will take the appropriate action.”

Bottom line: Jarvis comes across as convinced the government will stay the course on the required reforms.

Asked if there was anything which would block the loan in a separate interview with Reuters, Jarvis stated that the IMF would need reassurances that the reform program must be fully funded. He seemed optimistic, however, saying that Egypt should receive USD 1 bn from the World Bank as soon as the VAT is passed by the House. He also confirmed that the first disbursement will be USD 2.5 bn, and should be delivered in September, while future disbursements will depend on progress on the reform program.