Transcript of Press Conference with IMF Mission Chief of Egypt

April 1, 2024





Mission Chief for Egypt



Communications Officer

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MS. AL SHAMI:  Good morning.  Good afternoon to those of you joining us from Egypt and the region.  Thank you for joining today's press briefing.  I'm Angham Al Shami from the Communications Department.  If you are joining us online, we do have Arabic interpretations via the IMF Press Center.  I'm joined here today by Ivanna Vladkova Hollar, IMF Egypt Mission Chief and Division Chief at the Middle East and Central Asia department, who will give us a brief overview and then we will open the floor for your questions.  Ivanna, over to you.

MS. HOLLAR:  Thank you very much, Angham and good morning, everyone, and Ramadan Kareem to those observing it.  Thank you for making the time to participate in our press briefing today. 

On Friday, March 29, the IMF Executive Board completed the first and second reviews of the Extended Fund Facility for Egypt and approved an augmentation of the original program by about $5 billion to $8 billion in total.  This decision allows the authorities to immediately draw the equivalent of about $820 million. 

The Egyptian authorities have put together a strong economic stabilization plan to correct imbalances, some elements of which plan are already under implementation.  This economic stabilization plan is centered on a liberalized foreign exchange system in the context of a flexible exchange rate regime, a significant tightening of both fiscal and monetary policy to support the adjustment in the exchange rate, a reduction in public investment, broadly defined, and the implementation of reforms that would allow the private sector to become the engine of growth. 

There is no doubt that the recent sizable investment deal in Ras El-Hekma eased near-term external financing pressures.  However, it is still critical for Egypt to continue with the implementation of economic policies under the program in order to sustainably address Egypt's macroeconomic challenges.  The authorities have committed to use a large part of the new financing to improve the level of reserves, to fast track the clearance of foreign currency backlogs and arrears, and to reduce government debt upfront.  This is prudent and the right choice, as it would allow Egypt to improve its economic outlook faster and also be able to rely on stronger buffers in the face of any new future shocks. 

The authorities’ policies under the program are well designed to secure macroeconomic stability and protect incomes.  The Central Bank of Egypt's resolve to focus on reducing inflation and to tighten further, if necessary, is key to preventing further erosion of the purchasing power of households.  Implementation of the newly established framework to monitor and control broadly defined public investment will help manage excess demand.  A revenue based fiscal adjustment will put debt firmly on a downward path and provide resources for expanding the social safety net and for priority expenditure, including on education and health.  In this regard, it remains essential to continue to replace untargeted fuel subsidies with targeted social spending.

 With policies to restore macroeconomic stability in place, the stage is now set for accelerating implementation of the structural reform agenda intended to deliver inclusive and sustainable growth.  Withdrawing the state and military from economic activity as per the authority's state ownership policy and ensuring that the public sector firms are not given a competitive advantage over the private sector, is key to attracting foreign and domestic private investment in Egypt.  Achieving these goals is not going to be easy.  We continue to stand ready to support the Egyptian authorities in staying the course on economic policies that best serve the Egyptian people. 

With that, let's turn to your questions and over to you, Angham.

MS. AL SHAMI:  Thank you very much, Ivana.  We will now open the floor for your questions.  If you are on Webex, please turn on your camera and raise your hand if you want to ask a question and we will call on you, or you can post your question on Webex in the chat box or through the IMF Press Center.  We would be grateful if you can introduce yourself and your news outlet.  So, let's turn to Webex, and let's start maybe with Ahmed Yaqub.  Ahmed, please go ahead.

QUESTIONER:  Good morning, everyone.  My name is Ahmad Yaqub.  I am the managing editor of Al Youm Al Sabea. Egyptian Independent daily Newspaper.  My first question is about what are the tranches amounts and disbursement dates and reviews of the new IMF deal and with Egypt's Extended Fund Facility?  And what are the highly important measures and policies which should the Egyptian authorities take to maintain macroeconomic stability?  Thank you.

MS. AL SHAMI:  Okay, thank you, Ahmed.  We have a couple of more questions on tranches that we received online.  Ivanna, we have a question from Fatima, from Ahmed al Ghad, also asking about the future tranches and review timelines.  We also have a question from Hayat Hussain from Shahrukh News.  She's asking, the IMF agreed, increasing the loan for Egypt by $5 billion, allowing the authorities to draw the equivalent of about $820 million.  There are two delayed tranches.  That means the added finance now is only $120 million and at a small amount.  Why is that?  And is this related to non observance of the June performance criteria on international reserves on the basis of corrective actions?

MS. HOLLAR:  Okay, thank you very much.  Thank you for those questions.  So, on tranches and the schedule for next reviews.  The next review will be the third review under the Extended Fund Facility and is expected to take place on a quarterly cycle, meaning that we would expect it to be completed and considered by the IMF Executive Board by end June 2024.  So in just about three months.  That review is also expected to unlock 820 million.  So the same amount that was disbursed under the disbursement that took place after the approval of the first and second reviews.  The remainder of the reviews so the fourth through the 8th reviews, under the program will take place every six months thereafter, with each disbursement currently programmed to be about $1.3 billion.  The last review is scheduled for the fall of 2026.

 And in general, the key consideration in the size of the tranches of IMF financing is related to the timing and the size of the balance of payments needs or the external financing needs of the member country.  So, in determining the appropriate size of the tranches, in this case, the approved financing path took into account the timing and the availability of other financing to help external pressures.  The size of the tranche that was released after the first and the second reviews were completed also took into account the fact that the next review is indeed expected to take place shortly on a quarterly frequency, meaning that a similarly sized disbursement is expected to take place by the end of June, of course, subject to the completion of the conditions of the review. 

And one thing I would add is it's important to keep in mind that the Extended Fund Facility is a longer-term structural reform program supporting the medium-term needs of member countries.  And with the approved augmentation for Egypt, there is significant financing still left in the remaining tranches to provide sufficient and strong support to the authorities’ economic reform program over the remainder of the program.

MS. AL SHAMI:  Thank you, Ivanna.  Let's turn now to WebEx for questions.  And we have Dua.  Dua, please go ahead.

QUESTIONER:  Good morning, everyone.  Good morning Angham.  Hello Ivana.  Pleased to join you today and thank you for taking my question.  My question is the statement the IMF issued last Friday indicated that the IMF lowered the real GDP growth for the country in the current fiscal year that ends by the end of June.  I want to know what are the key drivers behind this decline before recovering, again, to a higher level in the upcoming fiscal year 2024-2025?  Thank you.

MS. HOLLAR:  Thank you for your question on GDP growth.  Indeed, the forecast for this current fiscal year was lowered to 3 percent, and that is very much on the fact that the economy has been experiencing significant external shocks and also on the significant constraints that the restrictions on FX availability have had on the private sector.  In recognition of the fact that these restrictions and the limitation of FX availability for the broader private sector are looking to be resolved on a forward looking basis as a result of the actions that were taken by the authorities, we therefore project a rebound in the economy in the following fiscal year, given that those restrictions have been lifted again, subject to the non-intensification of the external shocks that are currently hitting Egypt.

MS. AL SHAMI:  Thank you, Ivanna.  We have -- let's see, do we have more people on Webex?  Okay, we have two questions that we received.  One from Yasmin Mohammed Mounir from Hapi.  When is the next review?  What are the items that may be overlooked during the review, such as what was done regarding the foreign exchange reserve balance?  What are your recommendations to the Egyptian government regarding dealing with hot money and dealing with the asset exit program?  And from the Press Center, we have Yasmine Selim from CNN Business Arabic.  When will Egypt's economy be reviewed again?  So, I think we had a couple of questions on when is the next review?

MS. HOLLAR:  Yes, so I think we've answered the questions on when the next review is.  Again, the next review will take place on a quarterly cycle, which means that it's expected to take place within three months of the combined first and second reviews.  So we expect the IMF Board to consider the request for the completion of the third review by the end of June.  So again, in just about three months.

On the important reform on exchange rate policy and the normalization of access to FX, and the functioning of the FX market in such a way that the price of foreign exchange is determined on the basis of market conditions and available to private sector firms and to individuals.  This is an important reform that needs to be sustained.  It's not a one off reform.  It's important for a liberalized foreign exchange system in the context of a flexible exchange rate to continue and therefore, going forward, at each individual review, the expectation is that the conditions that we're seeing now in the market are going to continue to hold in the sense that we will not see a return to a system of FX rationing and lack of FX availability. 

The rest of the reforms under the program are very much as they were envisaged at the time of the program approval.  And a key reform going forward, again, because this is a structural reform program, is to ensure a level playing field for private sector firms, to ensure that we can support the authorities as they look to reduce the role of the state in economic activity as per the state ownership policy and support fair competition for private and public sector owned firms.

MS. AL SHAMI:  Thank you, Ivanna.  We will turn to WebEx now.  And we have Ahmed.  Ahmed, please go ahead.

QUESTIONER:  Good morning.  I would like to ask in Arabic.  I’m Ahmad Ahmadinejad from Misre (phonetic) from Egypt.  My question is regarding a comment from the press release by the Fund.  It's about the Ras El-Hekma deal, which is worth $35 billion, but the press releases that it will reduce the pressure on the balance of payment but if it were used prudently.  So, I would like to know the details.  What does the Fund mean by saying prudently?  Thank you.

MS. HOLLAR:  Thank you very much for that question.  So the expectation for what is a prudent use of the new resources coming into Egypt, from the Ras El-Hekma deal, is to ensure that those resources are used to reduce Egypt's vulnerabilities and to make sure that they're used to improve the outlook, the economic outlook facing Egypt.  And from that perspective, what we mean and what we have heard as a commitment from the Egyptian authorities is to save a significant portion of those proceeds in gross international reserves, to strengthen the buffers that Egypt has to deal with forward looking shocks, and to use a significant portion of those proceeds, so 50 percent of the local currency value of those proceeds to reduce debt, public debt.

MS. AL SHAMI:  Thank you, Ivanna.  We have a few questions that we received on inflation, so let me just read them to you.  Samar Elsayed from Al-Mal Newspaper is asking what are the IMF expectations of the economic growth, inflation rate, and FDI of the Egyptian economy through the coming period?  We have another question on inflation, also from Ahmad Yaqub.  What's the projected inflation rate of the new fiscal year in Egypt?  And yeah, I think these are the two questions on inflation.

MS. HOLLAR:  Ok, thank you very much.  I think we spoke a bit about growth.  We have reduced the growth forecast for this fiscal year, again, on the back of external shocks and on the difficulty in accessing foreign exchange up until the March 6 actions by the Central Bank of Egypt.  But then have upgraded the forecast for the following fiscal year as we expect the private sector, the environment facing the private sector, including the availability of critical foreign exchange, to improve.  And therefore we have upgraded the growth forecast to just under 4.5 percent for next year.

On inflation, inflation is expected to remain high for the very near-term future.  The inflation forecast for next fiscal year is on average about 25.5 percent and 15 and a quarter on for the end of the period at the end of next fiscal year.  Having said that, in the very near-term, the inflation forecast is quite a bit uncertain, given that it is possible that much of the pass through from the unification of the exchange rate has already played out into prices to date and so the price pressures forward may not be as strong.  And we've also seen a recent appreciation trend in the official currency, and that may also reduce some of the price pressures that we expect in the forecast as you see it now.  Is there a follow up question on that?


MS. HOLLAR:  Okay. 

MS. AL SHAMI:  That covers it.  We have also some questions that we received on the RSF.  So one question that we received from Amani Radwan Mohammed, when will you discuss Egypt's demand for finance under the RSF facility?

MS. HOLLAR:  Okay, thank you very much.  Just as a reminder, the RSF is separate from the EFF instrument that the Fund has put in place in order to support member countries objectives in meeting long term structural goals, including facing the shocks coming from climate change.  And Egypt has indeed requested access under this long-term facility to address climate policies. 

And as a reminder, in order to proceed with and qualify for access under the RSF, member countries need to have in place a strong set of policies that are intended to address the risks from climate change.  We expect to start discussing these policies with the authorities at the time alongside of the third review, which, as we've discussed, will happen in the next three months.  And of course, just like any other program approval, the authorities’ request will be subject to approval by the Executive Board.

MS. AL SHAMI:  Thank you, Ivanna.  We received two questions from Asharq Al-Awsat.  What is Egypt doing to hedge against painful global events that directly affect the Egyptian economy?  And what are the strengths that the IMF sees in the Egyptian economy?

MS. HOLLAR:  Thank you.  Thank you very much.  And thank you for this question.  Let me start by linking this to the last response.  I mean, one longer-term painful global event is certainly climate change.  The authorities have been developing a climate strategy and are working with external partners to mobilize financing and support to implement this strategy, which includes investment to help Egypt adapt to longer term climate change.  From a macroeconomic perspective, countries need to build resilience to shocks, including global shocks.  And there are many ways that countries can do that, using external inflows to build up foreign exchange reserves, which could then be used to finance critical payments in a time of stress, lowering public debt levels, so that in the case of a shock, there is space for public expenditure to help households and businesses cope with those shocks through targeted transfers and support.  Improving the quality of public expenditure so that less money is, less public money, less taxpayer money is wasted, and more can be used for priority needs.  And the authorities are currently working along all of those dimensions, I accounted for four here, in order to strengthen resilience against painful economic shocks, particularly global shocks. 

And of course, Egypt has tremendous potential, including a young and large population and entrepreneurship that, if properly supported, could certainly significantly boost economic growth.  So structural reforms that are aimed at allowing the private sector to grow and to generate jobs would unleash this important potential of the Egyptian economy.  And I would say that ensuring the public sector spending is also focusing on boosting human capital.  So, for example, spending on education would also be important to accelerate the outlook for growth for Egypt.

MS. AL SHAMI:  Thank you, Ivanna.  So we have a couple of questions in the chat box.  From Amany Adwan (phonetic) from Bursa, under the program, when will the CBE expected to remove capital controls?  And then we have another question from Dua.  What about the expected debt level for the country till the end of current fiscal year and the upcoming one?  And another question from Yasmine from CNN Business Arabic.  How the IMF sees energy subsidies in Egypt and should Egypt make other deals such as Ras El-Hekma to secure more dollar liquidity?

MS. HOLLAR:  Okay, thanks very much.  So on, -- sorry, repeat one more time very quickly, the headline?

MS. AL SHAMI:  Sure.  So from Dua we have what about the expected debt level for the country till end of current first kill year and the upcoming one?  And from Yasmin Mohammed Selim from CNN Business Arabic, how the IMF sees energy subsidies in Egypt and should Egypt make other deals such as Ras El-Hekma to secure more dollar liquidity? 

MS. HOLLAR:  Okay.  So thanks very much again on debt levels and all of the additional projections that you have been asking for, those will be made available in great detail when we publish the staff report in the coming days.  The broader picture on debt is one of debt reduction.  As I had mentioned, one of the prudent uses of the resources from the Ras El-Hekma investment deal is to save them, meaning that they will be used for debt reduction to reduce public debt levels immediately as those resources are made available. 

At the same time, the authorities have committed, as I mentioned in my opening remarks, to a fiscal consolidation strategy that is based on raising revenues and specifically from broadening the revenue base, meaning a broader set of economic actors would be contributing to improving the fiscal balance and reducing debt.  So, the policies under the program are indeed intended to put debt on a downward path, and you'll be able to see the evolution of the projected evolution of that path and its contributors when we make the staff report available.

 On energy subsidies, that is another important component of the fiscal strategy.  Energy subsidies tend to not be well targeted, meaning that they a lower the market price of fuel is generally available to all, whether or not they have the ability to pay or not.  And therefore, our advice generally is that we focus on, we focus scarce public sector resources on targeted subsidies, meaning those that actually are designed to reach the households that are in need of specific public sector assistance for increasing the ability for them to meet their needs.

 So again, the bottom line on energy subsidies is that the commitment under the program is to continue reducing them using the fuel price adjustment mechanism that has been proposed by the authorities in favor of using some of those resources to better target the resources that are going to households which need additional income support. 

And on the Ras El-Hekma, this was an investment deal that recognizes the potential of the Egyptian economy, in terms of generating additional tourism revenue.  As normally FDI flows come into a particular country, recognizing again, the ability of the country to generate additional resources in various areas.  And as long as the conditions are there, the conditions that we spoke about in terms of having a fair level playing field for the private sector to compete alongside with public sector enterprises, FDI is likely to come in in order to bring in the know how, bring in additional resources for investment that would, again, strengthen the ability of the Egyptian economy to generate jobs and generate economic growth.

MS. AL SHAMI:  Thank you, Ivanna.  We have, I think, one more question via Webex.  Yaseen, would you like to come in?  Yaseen from CNBC.  Okay, well, Yaseen sent us also his question via the chat.  Yaseen is asking, when do you expect or advise Central Bank to start easing fiscal policy?  And then another related question from Amany Adwan from Bursa, under the program, when will the CBE expected to remove capital controls?

MS. HOLLAR:  Okay, thank you very much.  I'm assuming that the question about the CBE relates to monetary policy.  So as we have just mentioned, the inflation rate is still expected to remain relatively high in the near term.  And therefore, it's very important for the Central Bank of Egypt, as it thinks about its monetary policy settings, to analyze the drivers behind inflation and have a strong forecast for, for the evolution of inflation and respond promptly.  Reducing inflation under the program is a joint, very important goal under the program between the authorities and the IMF, particularly because inflation has the potential to reduce the purchasing power of households and it's an important factor to address going forward. 

And so, the Central Bank should stand ready actually to tighten if we see those inflation pressures to continue.  And so it's perhaps a bit early to talk about an easing cycle of monetary policy, but the bottom line remains to stay focused on understanding what the data is telling us and what the forecast for the evolution of inflation is and respond if needed, to ensure that inflation comes down as per the Central Bank's inflation targets going forward.

MS. AL SHAMI:  Thank you, Ivanna.  We're coming closer to the end of the press conference, so we'll take this final round of questions.  We have a question from Mohammad Samir, Daily News, Egypt.  As Egypt progresses towards the third and fourth reviews of its IMF program, what criteria will the IMF assess regarding the state and military's reduced involvement in the economic activity?  And how will they judge progress in creating a level playing field for both public and private sectors? 

Related to this question, we received from Sara Sifidin (phonetic) from Madamasr (phonetic), how the IMF evaluating the resurgence of portfolio investment and the optimal use of these kind of funds related to currency flexibility, given that the government have used the funds in the past to stabilize the currency before external sentiment change, and we witnessed a huge outflows.  And then we have two more questions, but maybe you could answer this and then I'll turn to the other question.

MS. HOLLAR:  Sure, sure.  So on the issue of how will the program and how will IMF staff, jointly, with the authorities track the very important commitment of reducing the role of the state in the economy?  Again, some of this detail will become available to you as we release the Staff Report.  But what we have discussed with the Egyptian authorities for the future reviews is constructing an indicator that would allow us to jointly track progress in, again, reducing the role of the state in various sectors, again guided by the authority state ownership policy, which has designated sectors where it would be important to withdraw the state.  And so again, we are looking as part of one of the conditions for near term reviews is to develop a joint indicator that would objectively allow us to track progress along this very, very important dimension. 

The other question, I think, was on capital inflows, is that correct? 


MS. HOLLAR:  So on that, it's clear that the improvement, again, in the near term economic outlook has started to bring in capital inflows.  Those are coming in on the back of good policies that have been put together by the authorities and the strength of the authorities committed package of economic reforms.  And therefore, it is very important for the authorities to stay the course, as I mentioned in my opening remarks, in implementing those economic policies that are good for the Egyptian people and the Egyptian economy.  Staying the course in those reforms will sustain the inflow of capital inflows.  Of course, inflows into the economy are good.  They are an additional source of financing.  And as I mentioned, if they come in the form of FDI, they strengthen the capacity of the economy to generate jobs and generate growth.

 However, it is important for the authorities to manage those inflows carefully.  And this is an aspect where I look forward to discussing in the context of the next review policies that would allow the authorities to maximize the benefit from those capital inflows while making sure that macroeconomic stability is maintained.

MS. AL SHAMI:  Thank you, Ivanna.  The last two questions, and then we'll wrap up.  From Mahmoud Hamdan from the Middle East News Agency.  What do you expect about the performance on the Egyptian balance of payments?  Do you expect an increase in Egypt's dollar resources in a sustainable manner in the foreseeable future?  And then one more question, from Nafisa Eltahir from Reuters, could you please clarify the inflation targets?

MS. HOLLAR:  Sure.  So again, on the issue of the FX generating capacity of Egypt, the EFF, the Extended Fund Facility arrangement that we have approved for Egypt, and just recently reviewed in the context of the first and second reviews, is a medium-term structural reform adjustment program that is very much focused on increasing the capacity over the medium-term for the Egyptian economy to generate FX.  So, increasing its structural capacity to generate foreign exchange. 

And for that, the reforms that strengthen the capacity of the private sector to operate in this environment and have the private sector be the engine of growth and generating exports and attracting inflows that strengthen the capacity of the economy and the underlying foreign exchange inflows is very important. 

In the very near-term, what was important is for the authorities to correct some of the imbalances that were constraining the inflows of FX into the economy.  And that was the purpose of this very significant and comprehensive economic reform program that the authorities have started to implement, which also addresses the issue of having a foreign exchange market that functions well and allows access to FX on a market based system.

MS. AL SHAMI:  Well, thank you.  Thank you very much, Ivanna.  Thank you all for joining us today.  And thank you very much for your interest and hope to see you soon.  If you have any follow up questions, please feel free to reach out to me directly or  Thank you, and Ramadan Kareem.

IMF Communications Department

PRESS OFFICER: Angham Al Shami

Phone: +1 202 623-7100Email: