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Thursday, 25 July 2019

Egypt will be getting the final tranche of the USD 12 bn IMF facility soon

IMF signs off on final USD 2 bn tranche disbursal: The IMF’s Executive Board approved yesterday disbursing the final USD 2 bn tranche of the institution’s USD 12 bn facility to Egypt, after completing its fifth and final review of the country’s economic reform program, the institution said in a statement. Egypt had reached a staff-level agreement with the IMF over the tranche in May, and the tranche has been pending the board’s approval since then.

Lots of tub-tubs for our reform program from the fund: “Egypt has successfully completed the three-year arrangement,” IMF First Deputy Managing Director David Lipton said, adding that the economy has seen marked improvements since 2016, “supported by the authorities’ strong ownership of their reform program.” The program successfully corrected “large external and domestic imbalances,” growth and employment picked up, and public debt is on “a clearly declining trajectory,” Lipton said.

We also earned a pat on the back for achieving a 2% primary budget surplus and slashing fuel subsidies, “which are regressive, will encourage energy efficiency, help protect the budget from unexpected changes in oil prices, and free up fiscal space for social spending,” Lipton pointed out.

Don’t expect lower interest rates anytime soon: “Monetary policy remains anchored by the medium-term objective of bringing inflation to single digits. Core inflation appears to be well contained, but the central bank should remain cautious until disinflation is firmly entrenched. Exchange rate flexibility remains essential to improve resilience to shocks and preserve competitiveness,” Lipton said.

Looking ahead: The IMF sees the economic outlook as supportive for further structural reforms that would promote inclusive private-sector led growth. “Deepening and broadening of effective reforms is critical to underpin the positive outlook for growth and unemployment.”

The money will be in the bank this week, CBE Governor Tarek Amer told Bloomberg yesterday, referring to either today or tomorrow. CBE board member Fakhry El Fekky also said the government is expecting to receive the tranche “within two days” of the board’s approval. Egypt will repay the loan over several installments, with the first due late 2021, El Fekky reminds us.

Reminder: This may not be the end of the road for our relationship with the fund. The government is probing a potential non-financial post-program IMF agreement that it hopes to have in place by October, Finance Minister Mohamed Maait told Bloomberg last month. The institution’s assistant communications director Camilla Andersen, however, said at a press briefing a few days later that the IMF will not open talks until the government finishes the current program. It is still unclear whether the IMF will expect the country to remain committed to further measures before new talks take place.

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