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Wednesday, 9 November 2016

Lagarde to recommend IMF board approve Egypt USD 12 bn bailout package

IMF Managing Director Christine Lagarde will recommend the executive board approve Egypt’s request for a USD 12 bn bailout package at its meeting on Friday, 11 November, she said in a statement issued late yesterday. “The Egyptian authorities have embarked on an ambitious reform program to put the country’s economy on a sustainable path and achieve job-rich growth. The liberalization of the exchange rate and the adoption of the second phase of the fuel subsidy reforms are important measures in the authorities’ reform agenda,” she said. “I will recommend that the board approve Egypt’s request in support of this ambitious economic reform program that will help restore macroeconomic stability and bring Egypt’s economy closer to its full potential.”

First tranche next Tuesday? Finance Minister Amr El Garhy confirmed that the IMF would disburse the first tranche of the loan on Tuesday 15 November after the two sides wrap the paperwork, Al Borsa reports. The first tranche could be larger than anticipated: The IMF has raised the first payment of the loan to USD 2.75 bn from an expected USD 2.5 bn, following talks with the government, Deputy Finance Minister Ahmed Kouchouk told Reuters on Tuesday.

The caveat: This doesn’t necessarily mean the Central Bank of Egypt is going to be dumping the funds into the market in an extraordinary auction. From what we’re told, the CBE’s stance remains for the moment to see whether the banks can get the interbank market up and running and deliver a market-clearing rate in the process.

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