Too early to discuss increasing Egypt’s loan, IMF official says

By Rachna Uppal

DUBAI (Reuters) – The International Monetary Fund’s (IMF) $8 billion programme for Egypt is making progress, with the fund’s top regional official stating that any discussions to further increase the overall programme size are premature.

The IMF increased the size of its loan to Egypt to $8 billion from $3 billion in March, as the central bank said it would allow the currency to trade freely, and amid heightened spillover risks from the Israel-Gaza war.

Egypt’s President Abdel Fattah al-Sisi has recently warned that the country may be forced to re-evaluate its expanded loan programme if international institutions do not take into account the extraordinary regional challenges the country is facing.

Asked whether he was confident Egypt would meet its programme targets, Jihad Azour, the IMF’s director for the Middle East and Central Asia said that economic conditions in Egypt were expected to improve and that it was too early to discuss any changes to its size.

“The programme is moving in the right direction and is gradually achieving its targets, both in terms of growth recovery and gradual decline in inflation, and a normal functioning of the foreign exchange market,” Azour said, speaking in Dubai.

“Building buffers or strengthening the buffers of Egypt is the first line of defence that could help the Egyptian economy withstand any additional external shock,” he said.

Azour also said that Egypt was expected to save almost $800 million over the next six years on the back of recent reforms of the IMF’s charges and surcharges policy, which would provide additional support. 

In its latest Regional Economic Outlook report, the IMF projects GDP growth of 4.1% in 2025, from an estimated 2.7% this year, and above 5% over the medium term. These forecasts are based on the assumption that the Israel-Gaza conflict will ease next year and the country will continue to implement reforms. 

Headline inflation is projected to near 16% by the end of fiscal year 2024/25, well below the almost 40% in September last year.

The IMF’s Egypt team is scheduled to travel to Cairo in November to prepare for the third review of the programme. Managing Director Kristalina Georgieva also plans to visit to reaffirm the fund’s support for Egypt.