June 20, 2024

IMF says discussions with Egypt in Washington went really well as north African country seeks new loan

Managing Director Kristalina Georgieva and Director of Communications Gerry Rice conduct the IMF Managing Director Press Briefing during the 2022 Annual Meetings at the International Monetary Fund. IMF Photo/Cory Hancock 13 October 2022 Washington, DC, United States Photo ref: CH221013011.arw

The International Monetary Fund (IMF) announced on Saturday that in-person discussions between its staff and Egyptian authorities on the margins of the IMF and World Bank Annual Meetings in Washington DC were “very productive,” and that both parties have agreed to finalize their work to reach a Staff-Level Agreement “very soon.”

In a statement, Mr. Gerry Rice, Director of Communications at the IMF, said that IMF staff and Egyptian authorities made “substantial progress on all policies, including “a continued fiscal consolidation path that will safeguard public debt sustainability and ensure a steady decline of the debt-to-GDP ratio over the medium term.”

Rice added that progress was also made on “additional fiscal and related structural policies that would further expand the social safety net for the most vulnerable, improve the budget composition, and enhance fiscal transparency, monetary and exchange rate policies that would anchor inflation expectations, improve monetary policy transmission, improve the functioning of the foreign exchange market, and bolster Egypt’s external resilience. This would enable Egypt to gradually and sustainably rebuild foreign reserves, the implementation of the authorities’ comprehensive structural reform agenda would gradually enhance the competitiveness of the economy, reduce the role of the state in the economy, level the playing field for the private sector, improve the business climate, and foster transition towards a greener economy.”

The Egyptian government officially requested financial support from the IMF on March 23, 2022, to help mitigate the economic fallout exacerbated by Russia’s invasion of Ukraine. Since 2016, the IMF board has approved a combined $20 billion for Egypt.

“The rapidly changing global environment and spillovers related to the war in Ukraine are posing important challenges for countries around the world, including Egypt. In that context, the Egyptian authorities have requested the International Monetary Fund’s (IMF) support to implement their comprehensive economic program,” Ms. Celine Allard, IMF mission chief for Egypt said in a statement last March.

Allard added, “A set of macroeconomic and structural policy measures would mitigate the impact of this shock on the Egyptian economy, protect the vulnerable, and preserve Egypt’s resilience and medium-term growth prospects . To this end, the authorities’ recent actions to expand targeted social protection and implement exchange rate flexibility are welcome steps. Continued exchange rate flexibility will be essential to absorb external shocks and safeguard financial buffers during this uncertain time . Prudent fiscal and monetary policies will also be needed to preserve macroeconomic stability.”

Human Rights Watch and six other organizations wrote last April that “recent IMF loans to Egypt, worth a combined US$20 billion, introduced a number of economic policy changes that increased the cost of living for low-income people while doing little to address structural problems, including a lack of transparency, the erosion of the independence of key state institutions including the judiciary, and the military’s heavy-handed involvement in the economy, which is shielded from civilian oversight.”

“Despite $20 billion in lending to Egypt since 2016, the IMF has not achieved the reforms needed to meaningfully address the military’s growing and unaccountable role in the economy or to expand the social safety net to adequately protect people’s economic rights,” said Sarah Saadoun, senior business and human rights researcher at Human Rights Watch. “Progress on badly needed reforms remains elusive, and millions of Egyptians have been left increasingly vulnerable to external shocks in the global economy.”

Earlier this year, Egyptian President Abdel Fattah al-Sisi appealed to “friends in Europe” to support him in telling international financial institutions (IFI) including the IMF that “the situation in our country does not tolerate the applicable standards at this stage,” noted Human Rights Watch, an organization that has been critical of Egypt.

“The International Monetary Fund (IMF) should ensure that any new loan program with Egypt expands social protection, strengthens judicial independence, and addresses corruption and the need for transparency, including for military-owned businesses,” the seven organizations said last April.

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