Egypt and IMF putting 'final touches' to new deal, says PM Madbouly

Egyptian prime minister advises economic conference to leave past and focus on charting way ahead for embattled economy

Egyptian Prime Minister Mostafa Madbouly played down the significance of the Egyptian pound’s diminishing value against the US dollar. AP

Egypt and the IMF are putting the “final touches” to a deal under which the Cairo government will receive a loan to shore up its finances, Prime Minister Mostafa Madbouly has said.

The prime minister was speaking at the opening session of a three-day economic conference called by President Abdel Fattah El Sisi to chart the way ahead for the country’s embattled economy.

“We are putting the final touches to a new programme with the IMF,” Mr Madbouly said on Sunday without giving any details.

Egypt and the Washington-based lender opened negotiations shortly after the fallout from Russia’s February invasion of Ukraine began to have an adverse effect on Egypt.

The North African nation currency's has since lost about 20 per cent of its value against the US dollar, with the government placing restrictions on non-essential imports. Inflation has risen to more than 15 per cent, its highest in four years.

Up to $25 billion invested in Egypt’s once-lucrative debt market left the country within a month of the invasion due to the uncertainty roiling emerging markets, the prime minister said.

Tourism revenue were initially hit hard but picked up as the industry globally learnt to live with the conflict.

However, Egypt’s season could have been going better had it not been for the loss of Russian and Ukrainian tourists, who normally account for 30 per cent of all visitors.

There has been no official word from the Egyptian government or the IMF on the size of the loan Cairo wants but it is widely believed to be under $10bn.

The details of the new deal are as important as the size of the loan.

IMF officials are on the record as saying they wanted to see a more “flexible” foreign exchange mechanism, likely believing the Egyptian pound remains overvalued and should shed more of its value.

US 'not our major trade partner'

Mr Madbouly also sought to play down the significance of the Egyptian pound’s diminishing value against the US dollar, saying it should not be taken as an indication of how well the economy is doing.

There are instances, he said, when governments move to lower the value of their local currency to boost exports and attract investment.

Also addressing the conference, acting central bank governor Hassan Abdallah stressed the need to change what he called the culture of the local currency being linked to the dollar.

“We will make an index for the Egyptian pound through a group of other currencies in addition to gold in order to change the culture that we are linked to the dollar,” he said.

“The US is not our major trade partner and we are not a major oil-exporting country, so we don’t really need to be pegged to the dollar. Our main task is to control inflation."

Seeking to steer discussions away from criticising government policies in recent years, Mr Madbouly counselled the conference’s participants to focus on the future.

“Our aim is not to argue about the past but to agree on a clear road map for all the key economic sectors for the sake of the country’s stability,” Mr Madbouly told the inaugural session of the economic conference on Sunday.

President El Sisi also addressed the conference. In televised comments, he focused on the story behind his high-octane drive to modernise the country’s infrastructure and overhaul its economy.

Mr El Sisi’s economic reform programme began in late 2016 when he devalued the pound and partially lifted fuel subsidies, starting a process that continues to this day of introducing new taxes, raising charges on state services like renewing car licences and issuing new passports, as well as removing subsidies on essential services and fuel.

“I instructed the government to resign on Thursday [the day of the devaluation and fuel price rise were announced] if the people rejected the reforms, and I planned to call for an early presidential election on Saturday,” he said.

The Egyptian leader, 67, was first elected in 2014 for a four-year term. He won what would have been his second and final four-year term in 2018.

But a referendum in 2019 approved constitutional amendments proposed by parliament that included extending the presidential term from four to six years, but kept the two-term cap.

Under that amendment, Mr El Sisi is up for re-election in 2024 if he chooses to stay in office for another six years.

“Our path is one of hope and dream and, God willing, we will walk it together. It’s a path wide enough to take us all,” said the Egyptian leader, wearing prescription reading glasses for the first time in public.