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Sunday, 23 December 2018

Is Egypt trying to push the IMF’s timeline for the next round of reforms?

Is the Madbouly government trying to push the IMF’s timeline for the next round of reforms? The government is reportedly in talks with the IMF to delay unspecified components of its reform agenda, unnamed sources told the domestic press over the weekend. Cabinet is reportedly looking to divorce the disbursal of the next USD 2 bn tranche of the IMF’s extended fund facility from the implementation of some unspecified measures, which in the past have included the phase-out of subsidies and the float of the EGP, among others.

What’s going on? The unnamed sources told the press the government is wary of public discontent over rising prices and could pull back on select reforms including pegging the cost of energy to global prices after completely lifting subsidies in June. The state could get a little bit of breathing room from low oil prices. KSA may be budgeting oil at USD 80 for 2019, but most forecasts we’ve seen suggest something south of USD 70 is more likely.

Did El Sisi discuss all of this with Christine Lagarde? President Abdel Fattah El Sisi and IMF Director Christine Lagarde spoke on the phone on Friday to discuss Egypt’s reform program and ongoing relations with the IMF according to an Ittihadiya statement. The statement is light on detail, but the timing (and rareness) of the conversation could suggest the president is reassuring the international body that while we’re committed to reforms, a measure of “reform fatigue” has set in and warrants a breather.

Background: Egypt had reached a staff-level agreement with the IMF at the end of October on the fifth tranche after a delegation from the fund completed its fourth review of the government’s economic reform program, the “strong implementation” of which the IMF lauded at the time. The IMF’s executive board had been expected to meet this month to sign off on the disbursal of the tranche, but the board appears to have no reviews scheduled until the end of the year.

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