The International Monetary Fund (IMF) is considering cutting the period of its recent emergency financial assistance to Egypt Rapid Financing Instrument to under four years, according to Jihad Azour, Director of the IMF’s Middle East and Central Asia Department.
It is anticipated that this will be an incentive to other international financial institutions, to provide support to Egypt as it overcomes the current challenges and stimulate the economy.
Azour added that the IMF and Egyptian government are discussing the country’s economic reform directions in the coming period and additional support.
Bloomberg reported Wednesday that Egypt is seeking more than $5bn from the IMF under a stand-by arrangement and $4bn from other institutions, an official said. Besides the 2.8bn already received.Arab countries were swift to act on the coronavirus (COVID-19) crisis, protect their citizens and secure economic support at a rate of over 2.5% of GDP. This has given impetus to their economies through financial policies, in addition to some measures that were taken by their central banks, Azour said.
During a webinar entitled “Economic Development Post Covid-19: Middle East Challenges and Opportunities”, Azour noted that the IMF had to move on two levels. The first of these would be in terms of securing the financial capabilities of countries that needed funding.
Accordingly, the IMF has initiated a new $100bn fund to support countries in the Middle East who requested IMF assistance. These include Jordan and Morocco, who both acquired $3bn, and Tunisia which has acquired $700m in IMF assistance.
The IMF also green-lighted $2.8bnm in funds for Egypt, with the possibility of additional support in the future.
Moreover, the IMF has provided funds to Mauritania, Djibouti, Sudan and Somalia, as well as grants to Yemen as it is not be able to borrow, Azour said.
The IMF’s second step has been to establish policies supporting countries as they adapt to and face the coronavirus crisis.
The fund has undertaken several initiatives with the poorest countries by instigating debt forgiveness amongst other initiatives.
Azour recommended that countries promote financial inclusion to guarantee the informal economy is not left out. This will be useful to create greater economic strength, and empower communities through and education and easing of business activities.
Azour said there is a need for an economic policy that follows general health protection guidelines to protect citizen, and making priorities with respect to the general agreement on health infrastructure.
As countries are beginning to promote social protection, the IMF has developed some procedures to support them as they develop health and education programmes.
Azour said, “It is clear that the return of oil prices to normal levels will be difficult in the coming period, and may take several years.”
Abla Abdel Latif, Executive Director at the Egyptian Center for Economic Studies (ECES) said that, despite the global crisis, Egypt’s economic projections remain good. She added, however, that Egypt’s foreign currency resources have declined due to the pandemic.
“Egypt lost approximately EGP 50bn of tourism revenues, see a15%-20% decline in Suez Canal revenues, and a decline in remittances from Egyptian expatriates which contributed 10% to Egypt’s GDP,” said Abdel Latif, adding, “Besides, there is a problem related to export due to the closure of most of global markets.”
Abdel Latif said that Egypt’s move to ease how business is conducted has been very important to combating the challenges that affect Egypt’s economic competitiveness.
“Egypt has an opportunity to attract foreign investments from the Chinese market and, as a result, we have opportunities to provide incentives for investors,” Abdel Latif said, “In addition to this, there is more interest in the agriculture and industrial sectors as basic industries and commodities are needed after the COVID-19 crisis.”
Abdel Latif said that Egypt has to initiate and promote institutional reforms, with the IMF’s recent financial boost, through the Rapid Financing Instrument (RFI), is linked to these required reforms.