Egypt met all IMF requirements for 3rd review of $8 bln loan program

The roundtable was held a day after the IMF completed the third review of the Extended Fund Facility (EFF) loan program for Egypt.

“There has been a breach and a quantitative conditionality in terms of the overdraft facility with the central bank” as the budget borrowed from the bank temporarily, Hollar explained.

These temporary breaches have since been corrected and so the board approved a waiver, allowing the review to be approved, she added.

Responding to a question about the IMF’s expectations for Egypt’s inflation and how to balance fuel price increases with inflation control, Hollar said reaching the Central Bank’s inflation targets would take 12 to 18 months.

“We should see a significant decline in inflation over the course of the year”, according to Hollar.

For the gradual increases the government targets to apply on the fuel products, Hollar stressed that despite these anticipated increases to reach the cost recovery, inflation is expected to come down.

Hollar said as inflation remains high, it's crucial for policy to be designed with social impacts in mind, adding “There has been a lot of pressure on the cost of living from the price increases that we've seen over the last 18 months.”

“And from that perspective, it's important to use the information on distributional effects to design good introduction policies,” she continued.

Hollar said “In most cases most, if not all cases, fuel subsidies benefit the richer segments of the population more so than the poorer segments,” Hollar explained to Ahram Online.

Hollar deems reducing fuel subsidies and reallocating those public resources towards better-targeted support is a better approach to protecting the population from the impacts of the program's reforms.

“We hope to continue the dialogue with the Egyptian authorities… as they move forward with the difficult reform agenda. The social considerations are well integrated into policy design, and we will look to highlight that going forward in the program”, Hollar added.

During the event, Hollar tackled the progress Egypt has made in terms of the divestment plan. She highlighted “a bit of slowdown” in announcements. However, she noted that several divestment deals are in various stages of completion, with advisors already hired and bids under evaluation.