The Egyptian media has revealed a state of ambiguity regarding Egypt’s agreement with the International Monetary Fund (IMF) to cooperate on a $3 billion IMF-funded economic reform program.
The Egyptian Masrawy website stated that there is a case where Egypt objects to the application of some urgent measures that the Fund is emphasizing on implementation for the first review and promotion of the program.
The Egyptian site pointed out that against the backdrop of questions prevailing in economic circles and speculation about the possibility of a failure to reach an agreement and, therefore, the difficulty of completing the program, as bankers offer a number of alternatives to attract Egypt to dollar flows in the coming period, especially in connection with the slow implementation of the sale of state shares in 32 companies under the placement program, which is also one of the mandatory procedures under the Fund’s program.
The site notes that this comes at a time when Egypt is under pressure from a decrease in the supply of foreign exchange, an increase in the volume of external liabilities (import financing, debt repayment) and the elimination of the devaluation of the pound, which President Abdel Fattah El-Sisi recently mentioned as a factor in the national security, which could lead to increased pressure from the International Monetary Fund, which insists on ensuring continued cooperation with the need for Egypt to adopt a more flexible exchange rate.
And the Egyptian president said during a conference in the middle of last month: “As we approach the exchange rate, we must pay attention not to enter a crisis beyond imagination. On the lives of the Egyptians and possibly squander them, we are not sitting in our place.” .
A few days later, Kristalina Georgieva, director of the International Monetary Fund, stressed the importance of Egypt taking steps to move to a more flexible pound exchange rate system in order to protect foreign exchange reserves, comparing foreign exchange support to “pouring water into a punctured pot”, highlighting her belief that President Sisi will take the necessary measures. The right decision for the country.
Mohamed Abdel-Aal, a banking expert, told Masravi that Egypt has other alternatives for obtaining financial resources in foreign currency, in addition to the agreement with the Monetary Fund, but the use of these alternatives does not mean the end of work with the fund, whether at the technical or financial level.
Abdel Aal added that Egypt’s issuance of bonds in Asian currencies (such as the Chinese panda) is one of the solutions for Egypt to raise cash flow after difficulties in entering international markets (Eurobonds) to issue dollar bonds due to the current high cost. interest rates.
Finance Minister Dr. Mohamed Maait told Masravi last month that Egypt intends to place Panda (Chinese) bonds for the first time in the second half of the current calendar year, and preparations for the placement are underway.
Bonds in Asian currencies, such as those of China or Japan, enjoy great international weight as intermediaries – between the local currencies of developing countries and the dollar and the euro – with the weight of the two currencies in world foreign trade.
Egypt is not the first to offer bonds in Asian currencies, last year it sold $500 million worth of Japanese bonds (Samurai).
Abdel Aal expects the offer program, which includes the sale of state-owned stakes in 32 companies, will attract foreign and Gulf investors in the coming period, given Egypt’s huge investment opportunities.
Dr. Mostafa Madbouli, the prime minister, had expected in previous statements that Egypt would raise $2 billion by the end of June last year from the sale of shares in companies for sale.
Dr. Hala Al-Saeed, Minister of Planning, said in recent televised addresses that the target of the deals was achieved in the last fiscal year and that there are deals that have already been completed and will be announced after Eid. Adha.
Sahar El-Damati, vice president of Banque Misr and a banking expert, told Masravi that Egypt’s membership in the New Development Bank, linked to the BRICS group, makes it easier to get a loan from the bank, which increases its dollar resources.
Egypt officially became a new member of the New Development Bank on March 22, which is a bank established by the BRICS countries (Brazil, Russia, India, China and South Africa), after completing the necessary procedures, according to a previously released statement. in Egypt.
The New Development Bank was established by the BRICS countries on the basis of an intergovernmental agreement signed at the sixth BRICS summit in the Brazilian city of Fortaleza in July 2014 to finance infrastructure projects and sustainable development in the BRICS. countries and developing countries.
Al-Damati said Egypt would be better off looking to the International Monetary Fund for other options, especially after there has been little progress in financing Egypt’s economic reform program in a way that quickly resolves the foreign exchange crisis. agreement.
Eldamati added that Egypt has strong relationships with regional funds and institutions such as the Islamic Trade Finance Corporation and therefore finds it easier to obtain funding at low interest rates compared to high interest rates in international markets.
Abdel Aal suggested activating agreements between Egypt and a number of countries, such as Russia, India and the Gulf countries, on the exchange of goods in national currencies in order to reduce the influence of the dollar on foreign trade, as this is one of the most important solutions to overcome the crisis of shortage and abundance of foreign currency .
Although the Central Bank of Russia included the Egyptian pound in its currency basket last year, no funding for trade exchanges between the two countries in the two local currencies has been announced.
According to Abdel-Al, the continuation of the government’s policy of restricting imports and prioritizing essential goods for the time being could be one of the solutions to avoid deepening the currency crisis.
Dr. Mohamed Maait, Minister of Finance, announced today in a statement that the customs release of imported goods, goods and products at various ports and customs offices amounted to about 32 billion US dollars over the past five months, and that priority has been given to basic goods , components for food production, medicines and manufacturing needs.
Sahar El Damati called for the need to work on the development of Egypt’s main foreign exchange resources through some measures, including support for exports and expanding the industrial base, in addition to paying attention to tourism, to continue the plan to sell government shares in certain assets in order to increase dollar flows and reduce supply shortage crisis.
According to consistent data from the Central Agency for Public Mobilization and Statistics, there has been a significant reduction in the trade deficit in recent months, by about 50% compared to the same months of the previous year.
The trade deficit narrowed by 28.4% to $6.2 billion and will be capped at around $15.5 billion in the second half of 2022 year-over-year, according to the latest data released by the Central Bank regarding the balance sheet. . payments.
Source: Masravi