The International Monetary Fund (IMF) Executive Board Friday approved a 46-month arrangement under the Extended Fund Facility (EFF) for Egypt in an amount of $3bn.
Egypt’s IMF-supported programme presents a comprehensive policy package to preserve macroeconomic stability, restore buffers, and pave the way for inclusive and private-sector-led growth.
The package includes a durable shift to a flexible exchange rate regime, monetary policy aimed at gradually reducing inflation, fiscal consolidation to ensure downward public debt trajectory while enhancing social safety nets to protect the vulnerable, and wide-ranging structural reforms to reduce the state footprint and strengthen governance and transparency, according to the IMF.
Chairperson of the Engineering Export Council of Egypt (EEC), Sherif El-Sayyad, stated: “I do not think that there will be a direct impact of obtaining the IMF loan on engineering industries sector, and that the key to positive impact on the sector is providing funds and measures to import production raw materials necessary for operations, as well as import of production machines.”
El-Sayyad told Daily News Egypt that the coming period may witness a breakthrough in the provision of hard currency needed for import operations for the purpose of productive operation, and the industry in general needs more stability in price of raw materials and productive components, and this is the criterion for judging the success of the loan.
He added that the growth of exports may contribute significantly and rapidly to the treatment of the current economic crisis, but we are in dire need to meet demands of the productive engineering sector, whether by paying dues of exporters in new export subsidy programmes within a specified period. Besides, creating a programme to deepen local manufacturing, and raising customs duties on raw materials that have no local alternative. As well as, reducing costs of shipping lines to Africa, finding direct shipping lines, and providing local laboratories for issuing conformity certificates.
The government focuses on the export file, which contributes to finding solutions to obstacles facing exports, and the development of productive sectors that contribute to increasing the final proceeds of exports must be expanded. This could be done through creating a new generation of exporting companies, providing productive components for industry at reasonable prices, opening new markets and providing hard currency for the industry regardless of whether it is through external funds or by any means, he concluded.
Similarly, First Deputy of Division of Sanitary Ware Traders Division at Cairo Chamber of Commerce and a member of Importers Division Matta Beshay said that the IMF loan will not have a direct impact on import sector, because the password in moving this file is to provide hard currency for importers, as well as to open documentary credits for import operations.
Beshay pointed out that taking necessary measures and opening of documentary credits for import operations will greatly lead to a breakthrough in the process of importing raw materials necessary for production to operate a large part of basic industries.
He elaborated that the market suffers from a scarcity of dollars to open the documentary credits, and this contributes to the activity of black market to sell the dollar, as it witnesses exaggerated pricing by some merchants who price the dollar higher than its real value, which caused a lot of commodity prices to rise in local market.
Meanwhile, Mohamed Anwar, Chairperson of supplements maker Organix and member of the Chamber of Food Industries at Federation of Egyptian Industries, told Daily News Egypt that the IMF’s approval of the loan to Egypt is tantamount to a certificate of quality that will prompt more foreign investments to enter Egypt’s market.
Anwar added that the loan would strengthen the state’s strategic reserve, which provides hard currency to provide raw materials for production, noted that this loan will send a message of hope to local and foreign investors to direct more investments, which will eventually be reflected in prices of products offered in the local market and export increase.
He disclosed that the local industry suffers from many problems, for example, the food supplement industry suffers from conflicting legislation and lack of stability in the regulatory environment.