DEVALUATION, SUBSIDY CUTS NEEDED BEFORE AND NOT AFTER IMF LOAN is approved, says IMF’s Lagarde: “There are several prior actions which need to be completed before the Board can actually meet in order to formally approve a USD 12 bn program over a period of three years,” said International Monetary Fund Managing Director Christine Lagarde in response to a question on when the IMF’s Executive Board can meet and approve an extended fund facility to Egypt during a press briefing hosted by the International Monetary and Financial Committee on Saturday. “To my knowledge, these prior actions are almost completed, not quite, in relation to both the exchange rate and in relation to subsidies. There is still a little bit of implementation to be had before the Board can meet… So, that is the sequence: completing implementation of prior actions, convening of the Board, Board review of the proposal, hopefully approval, then first tranche released.” Central Bank Governor Tarek Amer had said in an interview last February: “[Flotation] is something we might consider only when the reserves are at the USD 25-30 bn level.” Devaluation before receipt of the first tranche of the IMF loan would leave Egypt short of even the low end of targeted reserves initially outlined by Amer, leaving the CBE without the liquidity it needs to flood the market.

The IMF will likely release around USD 2.5 bn as an initial tranche of the loan “within a day or so” of going to the IMF board, said Masood Ahmed, head of the IMF Middle East and Central Asia department, Bloomberg reported. Masood expects that the IMF board will likely look into the Egypt program by the end of October or the start of November, adding that Egypt is making “very good progress” on talks with Saudi Arabia, China and some G7 countries to secure USD 5-6 bn in funding needed to unlock the agreement. Finance Minister Amr El Garhy also said that Egypt is close to securing the funding, according to Bloomberg. “We’re around that number, more or less,” El Garhy said, but the government needs another “two or three weeks to wrap up provision of other financing before it’s in a position to conclude the IMF accord.” The agreements are either completed or pending, with some in their “final fine-tuning phase.”

Expect eurobonds in late October or early November. The markets are, in general, “very anxious” now, El Garhy said, adding that “hopefully something will be clear by then about the US elections.” The government is working on finalising the timing of the issuance with its advisers, he noted.

Also coming out of the IMF / World Bank annual meetings, International Cooperation Minister Sahar Nasr has signed the USD 500 mn Upper Egypt development loan with the World Bank, according to a ministry statement. The loan agreement has terms preferential to Egypt with a 35-year repayment period, an eight-year grace period a 1.2% annual interest rate, she told Al Mal.

The IMF, World Bank, and other international institutions have nothing to do with “impoverishing” Egyptians. “Our economic policy—or rather, the lack thereof—is what brought us to this point, compelling us to seek foreign loans and institute austerity measures… The only real conspiracy is the one we’ve perpetrated against ourselves,” former Deputy Prime Minister Ziad Bahaa Eldin writes in Ahram Online. Taking in foreign liquidity without changing underlying policies will be exacerbate the situation, he says. The government needs to reassess a wide range of policies, warning that the “coming phase” will not be easy.