IMF chief Kristalina Georgieva urges Egypt to push on with loan programme reforms

International Monetary Fund managing director Kristalina Georgieva on Thursday urged Egypt to continue undertaking its reforms as Cairo said it is considering re-evaluating the targets set by its bailout programme.

Ms Georgieva said delaying these reforms would make the true cost of repayment higher, “and that cost ultimately falls on the shoulders of people”.

“Egypt is better served by doing reforms sooner rather than later,” she said during the International Monetary Fund and World Bank Annual Meetings in Washington.

The IMF approved an initial loan of $3 billion to Egypt in 2022, before increasing it to $8 billion in March this year. Cairo was required to enact certain reforms, including introducing a free-floating currency exchange regime. Other commitments included reducing food subsidies, tightening monetary policy and enhancing competition in the private sector.

Jihad Azour, the IMF's regional director in the Middle East, said the floating exchange programme will help protect Egypt against external shocks, similar to the ones it has experienced in the past four years.

“[It is] very important to preserve it, because it's the best way to reduce the impact of external shocks on the local economy. Of course, it has to go hand in hand with monetary policy that works on addressing inflation,” he said.

Mr Azour also said the IMF was pleased with Egypt's growth prospects for the next fiscal year.

“How to do more is by allowing the private sector to be investing in creating jobs. And the best way to do it is for the state to give more space to the private sector,” he said.

Ms Georgieva's remarks come a day after Egyptian Prime Minister Mostafa Madbouly said Cairo was working under President Abdel Fattah El Sisi's orders to review the targets.

Mr El Sisi said escalating tension in Gaza has lowered Egypt's revenue by $5 billion to $6 billion over the past 10 months.

Data released by Egypt's statistics agency this month showed the country's inflation rate rose to 26.4 per cent in September, although still below its peak of 38 per cent in September last year. The agency said last month's increase in inflation was due largely to the rising costs of goods and services such as electricity and fuel that had previously been subsidised.

Ms Georgieva said the fund was willing to adjust Egypt's programme so it would benefit most of its citizens but warned the burden would get worse if introducing the measures is delayed.

The IMF boss said she will visit Egypt within the next two weeks to see how the fund can best support it. “But let me say this, [the IMF is] not going to do our job for the country and for the people of the country if we pretend that action that needs to be taken can be forgotten,” she added.

Ms Georgieva said spillover from the war in Gaza has adversely affected Egypt's economy, which the IMF predicts will grow by 4.1 per cent in 2025. She said Egypt was losing 70 per cent of its revenue from the Suez Canal because of Houthi attacks on Ships in the Red Sea area, as well as the lingering effects of the Covid pandemic.

The impact of current conflict has had a negative impact on the broader Middle East and North African economy, with regional growth “significantly downgraded” to 2.1 per cent this year largely because of the war in Gaza, Ms Georgieva said. “My deepest, deepest sympathy to everybody in the Middle East,” she said.