CAIRO: The Egyptian pound slid another 1% on Tuesday, after a 14% devaluation on Monday, and the government announced a budget restructuring in a sign it may be preparing for a new finance package with the International Monetary Fund (IMF).
Egypt’s economy was buffeted after Russia’s invasion of Ukraine prompted foreign investors to flee emerging markets. Russia and Ukraine were also the main exporters of wheat to Egypt and a major source of tourism.
Egypt’s central bank on Monday hiked its main overnight interest rates by one percentage point and stressed the importance of exchange rate flexibility.
“This would be in line with what is needed … to potentially reach yet another IMF programme, especially as it would be under exceptional access to IMF resources,” JPMorgan said in a note.
The government also on Monday announced a 130 billion Egyptian pound ($7.05 billion) economic relief package, a move that analysts said seemed designed to win IMF support.
Egypt has turned to the IMF three times in the last few years. It borrowed $12 billion under an Extended Fund Facility in November 2016, $2.8 billion under a Rapid Financing Instrument in May 2020 and $5.2 billion under a Stand-by Arrangement in June 2020.
Egypt is eligible for a new version of any one of the three programmes, according to a person familiar with its discussions with the IMF.
But because it has exceeded its normal borrowing quota it would have to adhere to exceptional access criteria, meaning it would be subject to a greater level of scrutiny, the person said.
($1 = 18.4500 Egyptian pounds)
Patrick Werr, Reuters NewsMarch 23, 2022
(Additional reporting by Nadine Awadalla and Marc Jones; Editing by Alex Richardson and Andrew Cawthorne)
