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Egypt rules out currency devaluation amid IMF visit

Egypt rules out currency devaluation amid IMF delegation’s visit
3 min read
Egypt - Cairo
21 January, 2024
The IMF visit coincided with a new report by Moody’s, revising its outlook on Egypt from “stable” to "negative."
The Egyptian pound has been struggling against the US dollar for months [Getty]

Egypt's government has ruled out an upcoming currency devaluation against the US dollar that coincides with the current visit of a delegation from the International Monetary Fund (IMF), describing possible scenarios as “mere speculations.”

During a phone interview with a talk show broadcast on satellite channel Al-Hadath Al-Youm on Saturday evening, the cabinet’s official spokesman Mohamed El-Homsany told host Sayed Ali that "the outcome of the meetings between Egyptian officials and the IMF delegation would be announced after negotiations over a new deal with new terms are concluded".

The IMF mission, led by Mission Chief for Egypt Ivanna Vladkova Hollar, has been in Cairo for ongoing discussions over the first and second reviews of Egypt’s reform programme supported by the fund’s Extended Fund Facility (EFF).

Local news outlets reported that the IMF team had been working with Egypt on finalising a set of policies that would enable the completion of two reviews.

The visit coincided with a new report by Moody’s, revising its outlook on Egypt from “stable” to "negative". The financial agency cited rising risks indicating that the North African country’s credit profile is likely to continue to deteriorate amid an unforgiving economic crisis.

It remains unclear, meanwhile, whether the IMF will raise financing for Egypt.

However, since the deal was reached in 2022, two reviews stipulated by the IMF for Egypt to receive the loan have been postponed.

Unconfirmed reports suggested that the reviews had been delayed for President Abdel Fattah al-Sisi to secure his third presidential term without his popularity being impacted by present economic woes. Despite this, observers say that the president's sweeping election win last month was a foregone conclusion, due to clampdowns on opposition in the country.

Egypt has encountered a huge financing gap surpassing $8 billion for the fiscal year 2023/2024, which could amount to over $20 billion in four years. The country’s external debt soared by 5.1 percent during the fourth quarter of 2022, reaching US$162.94 billion, a total of US$10 billion more than the previous quarter.

In November last year, IMF Managing Director Kristalina Georgieva said that the IMF had been "seriously considering" boosting its loans to Egypt as the economic impact of Israel's onslaught on the neighbouring Gaza Strip took hold.

Based on the agreement with the IMF, Egypt would benefit from a US$3 billion loan over 46 months under the Extended Fund Facility, provided that the country loosens state and military control over the economy and allow market forces to determine the value of the pound.

The Egyptian pound has been struggling against the US dollar for months, leading prices of consumer products to hike, primarily since Egypt depends on importation rather than domestic production, especially wheat, the most strategic commodity for the country.

One US dollar is currently worth about 30.95 Egyptian pounds, while it is valued at almost 60 EGP in the parallel market at the time of publication.