IMF to Review Egypt's Economic Challenges Amid Regional Conflicts
The International Monetary Fund (IMF) is preparing to conduct a review of Egypt's economic situation, as the country grapples with significant challenges stemming from ongoing regional conflicts. IMF Managing Director Kristalina Georgieva announced her upcoming visit to Egypt within the next 10 days to closely monitor the country's economic landscape and emphasize the importance of implementing necessary reforms. The Egyptian economy has been severely impacted by the Israeli war on Gaza and Lebanon, as well as the conflict in Sudan. These crises have led to a dramatic decline in revenues from the Suez Canal, a crucial source of hard currency for the country, with losses estimated at 70%.
In March, Egypt entered into an $8 billion financial support agreement with the IMF, which mandated the government to undertake several economic reforms, including subsidy cuts on fuel and electricity and allowing the Egyptian pound to float. However, these measures have sparked public discontent. Georgieva highlighted the need for Egypt to adhere to these reforms, stating, "We will not be doing what needs to be done for the country and the people of the country if we pretend that the action that needs to be taken can be bypassed."
Economic Reforms and Rising Prices
President Abdel Fattah el-Sisi has indicated that Egypt may need to reassess its IMF program if international institutions fail to consider the extraordinary challenges posed by the regional turmoil. Recently, the Egyptian government raised fuel prices for the third time this year, with diesel and gasoline prices increasing by 11% to 17%. Additionally, in June, the price of subsidized bread surged by 300%. Prime Minister Mostafa Madbouly has mentioned that fuel prices are expected to rise gradually until the end of 2025.
The economic outlook remains bleak, with Egypt reportedly losing between $6 billion and $7 billion in revenues over the last several months. The situation is exacerbated by Houthi attacks in the Red Sea, which have caused ships to divert from the Suez Canal, resulting in a significant drop in revenues from $2.54 billion in the second quarter of last year to just $870 million this year. The IMF had planned to conduct a review of Egypt's lending program but has postponed this until after its annual meetings in Washington, delaying the disbursement of a new $1.2 billion loan tranche. Key reforms needed include a flexible exchange rate system, tighter monetary and fiscal policies, and an environment conducive to private sector growth.
