Cairo: Egypt is in talks with the International Monetary Fund on augmenting its rescue program to over $5 billion, according to people familiar with the discussions, confident it can overcome the roadblocks facing its existing package by addressing concerns including its currency policy.
Any announcement on a potential increase from the $3 billion secured last year would only come after Egypt completes its two delayed program reviews, said the people, who asked not to be identified as the matter is confidential. No decision has yet been made, they said.
The IMF and Egyptian officials didn’t respond to requests for comment.
Egypt is already the IMF’s second-biggest borrower after Argentina and faces financing needs estimated by Morgan Stanley at $24 billion in the fiscal year through June 2024 - including billions in repayments to the fund.
The Washington-based IMF has yet to complete reviews initially scheduled for March and September, with Egypt’s currency management remaining the main stumbling block.
A mission from the IMF may visit Egypt to start the two reviews around the end of October, according to the people. Several options are set to be discussed during the visit, including a path for reaching a staff-level agreement on the review, they said.
Currency reform would then take place after presidential elections in December, paving the way for the IMF board’s approval of the review and then the disbursal of the delayed loan tranches, they said.
Egypt owes nearly $22 billion to the IMF, according to the central bank.
Suffering its worst foreign-exchange crunch in years, Egypt has devalued its currency three times since early 2022, with the pound losing almost half its value against the dollar.
But Egypt is so far falling short of delivering on promises to allow for what the central bank has called a “durably flexible” exchange-rate regime. After previous devaluations, long stretches of stability in the pound followed bouts of depreciation.
The IMF’s Managing Director Kristalina Georgieva said last week the country would “bleed” precious reserves unless it devalues again.
But the approaching elections, in which President Abdel-Fattah El-Sisi is likely to extend his rule until 2030, make a currency move before the vote a difficult proposition. In June, he appeared to reject another imminent devaluation, warning of the toll rising prices would take on Egypt’s 105 million population.
A successful review would unlock about $700 million in postponed loan tranches, allow access to a $1.3 billion resilience fund and potentially spur major Gulf investments.