Egyptian government to complete economic reform talks with IMF to unlock $21bn in external lending

By bne IntelliNews July 27, 2016

The Egyptian authorities are in final stages of negotiating an economic reform program with the International Monetary Fund (IMF) that would unlock up to $7bn in annual funding from multilateral sources over the next three years, said a cabinet statement.

Ongoing negotiations are expected to focus on adjustments requested by the IMF on Egypt’s homegrown economic reform program, presented to parliament late in March, before bringing the package to be agreed between the IMF and the government into a vote in the legislator.

The cabinet statement explicitly linked the successful completion of IMF talks with the implementation of reforms previously recommended by the multilateral lending institution. Fiscal consolidation measures topping the list of structural reforms required by the IMF for FY2016/2017 include the replacement of the current sales tax with a value-added tax, continued reform of the subsidy system, adoption of Civil Service Law, pension reforms and government spending cuts. Some of IMF’s recommendations have already been implemented by the authorities, such as, the Civil Service Law recently signed into law by parliament, while VAT is currently being debated in the chamber.

In addition, the IMF is urging the Egyptian authorities to adopt monetary measures such as the gradual implementation of a flexible exchange rate regime to relieve the pressure on the balance of payments through import reduction and a growth in exports. Meanwhile, the IMF is advising the Egyptian government to implement poverty reduction programs to shield marginalized segments of society from the negative impact of structural reforms.

According to finance minister Amr El Garhi, a deal with the IMF would unlock up to $21bn from external lending sources over the next three years. The sum is to be divided between $12bn from the IMF in three equal tranches of $4bn annually for three years, $3bn from the World Bank in three equal tranches over three years, $1.5bn from the African Development Bank in three equal tranches over three years, $3bn in international bonds and a further $2.5bn from other sources.

Egypt’s annual funding gap has been estimated by the authorities to be between $10bn-$12bn leaving a further $3bn-$5bn annually to be covered by investments. The cabinet statement announced that the government intends to privatize public sector enterprises through listing them on the stock exchange. Last week, investment minister Dalia Khorshed was quoted saying that her ministry plans to attract $10bn in investments over the next three years through the privatization of state assets including banks and oil companies.

Following the adoption of a three-year IMF inspired economic restructuring plan, the Egyptian government plans to cover the annual funding gap by substituting the prospective output from newly discovered giant offshore Mediterranean natural gas fields for natural gas and other energy products currently being imported at a monthly cost of around $1bn.

Related Articles

EBRD prepares to welcome Lebanon into fold

The EBRD is set to welcome its 66th member country and the fifth from the southern and eastern Mediterranean (SEMED) region once the Lebanese government finalises the last steps of the joining ... more

Russia and Saudi Arabia to launch joint projects worth $3bn in 2017

Russia and Saudi Arabia will launch joint projects worth $3bn by the end of 2017, the speaker of Russia’s Federation Council Valentina Matviyenko said at talks with members of the Russian-Saudi ... more

Egypt’s President El Sisi to announce state of emergency after church bombings

Egypt’s President Abdel-Fattah El Sisi announced in a televised speech his intention to impose a nationwide state of emergency for three months following two deadly bomb attacks on Christian ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss