On the 16th of December 2022, the IMF Executive Board approved a 46-month arrangement under the Extended Fund Facility (EFF) for Egypt in an amount of US$3 billion.
We asked Yasmine Ghozzi, a Senior Economist at S&P Global Market Intelligence, about her view on the IMF loan approval, and here we come to the outlook.
The IMF Board approving the loan is credit positive. In the short term, a combination of further currency adjustment and liquidity injection is needed to clear the remaining import backlog. The source of this liquidity injection could come from accelerating asset sales deals with the Gulf and/or looking for new ways to attract more FX to the market. With the widening gap between the official FX rate and black market rate coupled with high inflation, we reaffirm our views that tightening is warranted, projecting further hikes of 200 bps. The latter move could take place either on 22 December when the Monetary Policy Committee (MPC) of the CBE convenes or early 2023. We note the CBE has already delivered a significant tightening with the cancellation of the subsidised lending scheme to several sectors which was allowing them to borrow at 8%, another IMF requirement. In addition, the CBE has been extending the maturity of its open-market operations, having previously raised banks’ reserve requirements from 14% to 18%. According to Yasmine Ghozzi, Senior Economist, S&P Global Market Intelligence.
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