Three Egyptian dailies said today that Cairo was proposing to IMF delegates an 18-month reform program in return for a USD 12 billion loan over three years to shore up its economy, but that differences remained between the two sides on how to proceed.
Three Egyptian dailies said today that Cairo was proposing to IMF delegates an 18-month reform program in return for a USD 12 billion loan over three years to shore up its economy, but that differences remained between the two sides on how to proceed. The reports by the privately-owned Al-Shorouk, Al-Masry Al-Youm and Al-Watan said the two sides were at odds over the size of a proposed devaluation of the Egyptian pound and the timetable for implementing some of the more politically sensitive reforms, like reducing or removing state subsidies on fuel, electricity and food staples.
According to the papers, the International Monetary Fund has rejected Egyptian requests for a delay or a staggered implementation of some of the proposed reforms.The IMF’s response, according to Al-Masry Al-Youm, was categorical and reflective of Egypt’s dire economic situation and the urgency of fixing it.”There is no time left and nothing should be put off,” it said quoting, like the other two papers, government sources familiar with the Egypt-IMF talks that started last week in Cairo under tight secrecy.
Egypt is struggling to keep its economy afloat, amid a slump in tourism, foreign currency shortages and double digit inflation and unemployment. The government is also fighting an insurgency in the strategic Sinai Peninsula while continuing to show little tolerance for domestic political dissent. Today, the central bank reported a drop by about USD 2 billion in foreign currency reserves, down to USD 15.54 billion at the end of July after honoring a number of foreign debt repayments.
Egypt’s economic crisis has taken on a serious political dimension, with critics now blaming President Abdel-Fattah el-Sissi for exacerbating it by embarking on massive costly infrastructure projects they say have drained the country’s meager funds and done little to revive the economy. El-Sissi, in office since June 2014, counters that the projects, like a nationwide road network and an expansion of the Suez Canal, are vital if the country was to attract investors and their benefits would filter down in time. He has repeatedly vowed in recent days to shield the poor and middle class from a virtually inevitable wave of price hikes when reforms are implemented. On Monday, his government announced higher electricity charges for domestic use as part of a plan to lift state subsidies in the energy sector.
The IMF delegates, according to the three papers, see 11.60 pounds to the US dollar as a realistic exchange rate.
Such a rate would be nearly three pounds more than the current official rate of 8.87 pounds available at banks but close to the thriving black market rate of 12-12.50 pounds.