The International Monetary Fund (IMF) said in an online conference that the second tranche of the $12 billion loan to Egypt will be disbursed to Cairo in late April, praising Egypt’s “good start” in implementing its economic reform programme.
The online conference, held by IMF mission chief for Egypt Chris Jarvis, saw the first comprehensive report released by the IMF on the 2016 loan agreement with Egypt. Egypt received the initial $2.75 billion tranche of the loan late last year.
“So far, so good. Egypt is off to a pretty good start. On the budget deficit, the government is following up with its plans; and legislations in major areas are being discussed in the parliament,” Jarvis said.
In a response to a question by Ahram Online, Jarvis said that IMF officials are set to visit Egypt in February to “to follow up on what the government has performed” in its economic reform programme, as well as “discuss the programme and its first review” with the Egyptian government before the second tranche is released. Jarvis praised the reform measures including the implementation of the Value Added Tax, cuts in fuel subsidies, the passing of the civil service law, curbing public spending, and the work done in the Takaful and Karama social safety network initiative.
The Takaful and Karama programme, established by the government in early 2015, is a national social safety net programme aimed at protecting the poor through income support. Jarvis also praised initiatives by the Egyptian government to reform the industrial licensing system and to push forward a new bankruptcy law. Among the benchmarks needed for the second tranche are money supply, credit from the Central Bank of Egypt (CBE), reducing the budget deficit and increasing the level of international reserves.
“The benchmarks are likely to be met,” Jarvis said reassuringly.
In July 2014, Egypt embarked on its economic reform programme in an attempt to curb the growing state budget deficit – estimated at 12.2 percent of GDP in 2015/16. The CBE freely floated the pound in November 2016 and raised key interest rates as part of a set of reforms aimed at alleviating a dollar shortage and stabilising the country’s flagging economy.
Immediately following the flotation of the local currency, the IMF board approved the loan and the Central Bank of Egypt (CBE) received an initial $2.75 billion tranche. Jarvis said that after the CBE’s liberalisation of the Egyptian pound, the currency was “more depreciated than we expected given the fundamentals.” Jarvis also commented on the government’s decision to refer the IMF deal to parliament, saying that “they welcomed the discussion by the parliament.”
“I hope this briefing can help in their discussions,” Jarvis added.