Egypt ‘close to IMF loan of $9bn’

Reuters/Denis Balibouse

• Negotiations progress
• Deal ‘in hours or days’
• Foreign currency shortage

Egypt has reached a staff-level agreement with the International Monetary Fund for an extended fund facility (EFF) two or three times bigger than the existing deal, according to various Egyptian news outlets.

Al Borsa newspaper was among those reporting that a new deal could be announced “in hours or days”.

Sources told Al Shorouk newspaper the new loan could be as high as $6 billion, while a report by news outlet Enterprise put the amount at $9 billion. 

• Egypt ends tax privileges for state enterprises
• IMF ‘likely to drop currency demands for loans to Egypt’
• Suez slump compounds Egypt’s foreign currency crisis

A previous EFF worth $3 billion reached a staff-level agreement in October 2022. Since then, only $347 million has been released after the loan’s first review – originally scheduled for March 2023 – was held back due to concerns that Egypt had failed to meet its requirements.

Disagreements over currency reform have proved a particular sticking point, although IMF official Daniel Leigh told Reuters on Tuesday that the first and second EFF reviews – which have now been merged – could be completed “in the coming weeks”. 

IMF Middle East and Central Asia director Jihad Azour told reporters on Wednesday that negotiators had made recent progress.

Despite the central bank devaluing the Egyptian pound from 15.7 to 30.9 against the dollar between March 2022 and March 2023, Egypt remains beset by a deepening foreign currency shortage with the parallel market dollar rate reaching 72 at time of publication. 

Egypt’s currency crisis has worsened since the start of the conflict between Israel and Hamas, due to the impact it is having on critical sources of hard currency, particularly tourism and Suez Canal revenues. 

On January 18, Moody’s cut Egypt’s credit outlook from “stable” to “negative”, prompting a further 20 percent drop for the Egyptian pound in the parallel market.

In an accompanying report, Moody’s cited the “high likelihood” of an IMF loan being increased to as much as $10 billion, which it believes could cover the government’s budget shortfall for the financial years 2024 and 2025. 

The ratings agency added that a further downgrade is possible if the government proves unable to service its local currency debt or boost foreign exchange reserves.