Egypt Likely to Receive $20 Bln Financing Over Four Years: Report

Egypt is likely to receive $20 billion in loans and investments from the International Monetary Fund (IMF) and other entities over four years, according to a recent report by brokerage firm Cairo Capital Securities (CCS).

The report expects the IMF to expand its $3 billion four-year loan programme with Egypt to $10 billion to be disbursed over four years with possible adjustment to the repayment schedule.

The report said that Egypt is scheduled to repay around $5 billion to the IMF in 2024.

It notes that “other creditors and direct investors” could inject $10 billion in financing into Egypt to eliminate the gap between the gap between parallel and official rates exchange rates.

According to the Central Bank of Egypt (CBE), Egypt’s debt owed to the IMF reached $21.2 billion by the end of June 2023.

Egypt’s external debt reached $164.73 billion at the end of June 2023, the CBE’s data showed.

The country is required to pay $29.23 billion in external debt service in 2024, $19.43 billion in 2025, and $22.94 billion in 2026.

Last week, Julie Kozack, the IMF’s director of strategic communications (COM), told Ahram Online that the IMF is currently discussing with Egyptian authorities providing additional financing to ensure the successful implementation of the policy package for Egypt to help it withstand the repercussions of the recent conflict in the Middle East and its potential adverse impact on tourism revenues.

A scenario for the coming months The brokerage firm expects the CBE to increase interest rates by five percent during its meeting on 21 December to keep inflation in check, before shifting to a “crawling peg” exchange rate system in the first six months of 2024, which means applying some minor adjustment to the exchange rate of the pound.

In the second half of 2024, the CBE is expected to apply a free-float system under which the USD/EGP rate is likely to approach EGP 40, the report highlighted.

Since March 2022, Egypt has devalued its currency three times in response to a foreign-currency crunch. With these three waves of devaluation, the pound has lost over 75 percent of its value against the US dollar since March 2022. It is now traded at around EGP 31.

The CBE hiked the key interest rates by a total of 11 percent (1100 bps) since last year.

CCS expects commercial banks in Egypt to launch one-year certificates of deposit at rates ranging between 27 percent and 30 percent after the monetary policy meeting in December.

Finally, the report forecasts that credit rating agencies to upgrade Egypt’s sovereign credit rating to BB by the end of 2024 and early 2025 with a positive outlook.

Under its agreement with the IMF, Egypt is committed to taming inflation down to seven percent by FY2024/2025 while expanding the adoption of flexible interest and foreign exchange rate regimes.

Egypt’s annual headline inflation decelerated to 36.4 percent in November, down from 38.5 percent a month prior, according to the data released by the Central Agency for Public Mobilization and Statistics (CAPMAS) .

Under the IMF agreement, Cairo was slated to receive two more tranches in March and September of this year, but these were delayed.

Egypt has yet to fulfil the two reviews stipulated in the loan agreement.