Arab Finance: The IMF mission to Egypt reported that the central bank “affirmed its commitment to maintaining a flexible exchange rate regime” to protect the economy from external shocks, while praising the key reforms Egypt has implemented to maintain macroeconomic stability.
He drew statement Issued by the Fund at the conclusion of the mission’s visit, led by Ivana Vladkova Hollar, to “significant progress” in discussions between the government and the Fund, towards completing the fourth review under the expanded $8 billion Egyptian economic support program, which was approved last March.
Completing this review allows for the disbursement of a $1.3 billion tranche of the Fund’s loan, which represents the largest among the various tranches, according to previous statements by an official at the international institution.
In early March, Egypt allowed the pound to fall by about 40% to about 50 pounds to the dollar, in an attempt to stop a two-year crisis. The currency rebounded slightly in the following weeks, and has been trading at an average of over 48 pounds to the dollar since April.
The Fund alerted to the multiple geopolitical tensions in the region and their impact on Egypt’s economy, noting that the Israeli war on the Gaza Strip and trade tensions in the Red Sea had a negative impact and “caused significant declines of up to 70% in the revenues of the Suez Canal, which is an important source of currency.” “The increasing number of refugees increases financial pressure on public services, especially health and education.”
He praised the reforms undertaken by the Egyptian government in the face of this difficult external environment, according to the statement, noting that unifying the exchange rate since last March led to “eliminating the accumulation of demand for foreign exchange and reducing imports.”
“Tightening monetary policy significantly helped contain inflationary pressures,” according to the statement, which considered that “in the future, the focus must remain on ensuring that inflation continues in a steady downward trend towards the medium-term target.”
The Fund agreed with the Egyptian government to “make more efforts to mobilize domestic revenues, contain financial risks, especially those arising from the energy sector, and expand the social safety net,” according to the statement, which also welcomed “comprehensive plans developed by the authorities to simplify the tax system and improve Customs procedures and trade facilitation.
The statement also noted that “discussions will continue over the coming days to complete agreement on the remaining policies and reforms that can support the completion of the fourth review.”
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