Egypt's Economic Challenges and IMF Deal Reassessment
Egyptian President Abdel Fattah el-Sisi has indicated that the country may reconsider its $8 billion program with the International Monetary Fund (IMF) in light of ongoing regional challenges. During the Second World Conference on Population and Health, Sisi emphasized that international institutions must acknowledge Egypt's unique difficulties, which include significant revenue losses and heightened economic strain.
The IMF deal, signed in March, mandated Egypt to implement austerity measures such as cutting subsidies on fuel and electricity, as well as allowing the Egyptian pound to float. These changes have provoked widespread public discontent, as evidenced by recent fuel price hikes for the third time this year, with increases ranging from 11% to 17%. Sisi noted that if the current program continues to impose unbearable burdens on the population, a reassessment will be necessary.
Revenue Losses and Economic Strain
The Egyptian economy has faced substantial setbacks, with Sisi reporting a loss of $6 to $7 billion in revenue over the past ten months. Contributing factors include Yemen's Houthi attacks on shipping routes in the Red Sea, which have diverted traffic away from the Suez Canal, leading to a sharp drop in revenues from $2.54 billion to $870 million in the second quarter compared to the previous year.
As part of the IMF agreement, fuel prices are expected to rise gradually until 2025, with previous increases already affecting the price of subsidized bread, which saw a staggering 300% rise in June.
Upcoming IMF Review and Future Outlook
Egyptian officials are set to engage with the IMF and World Bank during their annual meetings in Washington, where discussions about the ongoing loan program will take place. The IMF had planned to review Egypt's loan agreement at the end of September, but this review has been postponed, delaying the disbursement of a $1.2 billion tranche of the loan.
The IMF maintains that Egypt's economic reforms, which focus on a flexible exchange rate, tighter monetary policy, and reduced infrastructure spending, are crucial for achieving macroeconomic stability. However, the ongoing economic pressures and potential reassessment of the IMF deal highlight the precarious situation facing Egypt's economy and its citizens.
