Egypt has “almost completed” the actions required for the IMF’s board to review its US$12 billion loan accord, but some measures related to the exchange rate and subsidies are still pending, the fund’s managing director Christine Lagarde said.
The most populous Arab country is relying on the deal to restore investor confidence and ease a dollar shortage that hampered the economy and led to the emergence of a black market for foreign exchange. Masood Ahmed, the IMF Middle East chief, said the board may be able to review the agreement by early November.
“There are several prior actions which need to be completed before the board can actually meet,” Ms Lagarde said at a press briefing in Washington. “To my knowledge, these prior actions are almost completed – not quite – in relation to both exchange rate and in relation to subsidies, there is still a little bit of implementation to be had before the board can meet.”
The comments will probably add to speculation that Egyptian policymakers will cut subsidies and devalue the pound before the IMF board meets and not after securing the first installment of the loan. The pound has plunged to record lows in recent days on the black market on speculation a devaluation was imminent.
“It’s inevitable at this point that they’re going to devalue,” said Jean-Paul Pigat, a senior economist at Emirates NBD. “If they want to sign the agreement or if they want the executive board to approve it, they’re going to need to loosen their controls.”
The central bank weakened the currency by more than 10 per cent in March and parliament passed a law punishing illegal currency trading by jail. The central bank governor Tarek Amer said in July that defending the exchange rate over the past five years was a “grave mistake”.
Ms Lagarde said she hopes “that the board can meet promptly, and then once the board has met, it will have meant that the prior actions are completed, and therefore the first tranche can be released”.
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