Tuesday, the International Monetary Fund urged Egypt to achieve significant progress regarding the financial and structural reforms. That includes more flexibility in the EGP exchange rate, promoting the private sector’s competitiveness, reducing the state’s role in the economy and improving governance. At the same time, Cairo is seeking a new loan from IMF.
Through its final review of the Stand-By Arrangement concluded with Egypt in 2020 to get USD 5.2 Billion, the executive board of IMF confirmed that Egypt is still fragile to international shocks due to the high public loan servicing burden and the high requirements of foreign finance. This month, Celine Allard, mission chief for Egypt, revealed that the IMF experts held fruitful discussions with the Egyptian government about economic policies and reforms to be supported by an arrangement for a new loan under the Extended Fund Facility.
According to the definition of IMF, this type of loan indicates crucial med-term problems in the balance of payments in Egypt due to structural weaknesses. This loan is the same USD 12 billion in finance that Cairo received in 2016 as part of the economic reform program. It has come at the same time as the EGP devaluation, which was the critical requirement for the IMF to secure the loan for Egypt. In 2020, after the outbreak of the Corona Virus pandemic, Egypt received another USD 8 billion loan. The loan was divided into two instalments, USD 5.2 billion and USD 2.772 billion.
A research paper for Timothy Kaldas, Tahrir Institute for Middle East Policy fellow, confirmed that the massive loan of USD 12 billion has failed to achieve its primary objective, which was to facilitate private sector-led comprehensive growth, reduce the unemployment rate, attract direct foreign investments and promote Egypt’s macro-economic stability. Klldas proved his argument through the official poverty rate, which reached 29.7% and the non-oil private sector downsized through 63 of the last 72 months.