IMF on Egypt’s upcoming loan review: We cannot do our job properly if we abandon what needs to be done

International Monetary Fund (IMF) Director Kristalina Georgieva commented on Egypt's ongoing US$8 billion loan program on Thursday saying, “we cannot do our job properly if we abandon what needs to be done.” This comes as Egypt prepares for an upcoming review.

Speaking on the sidelines of the IMF and World Bank Group’s 2024 meetings in Washington, DC on Thursday, Georgieva told the press that she will visit Egypt in 10 days and that the IMF is open to reviewing any program “to better serve the circumstances.”

This comes a few days after President Abdel Fattah al-Sisi made rare comments about the IMF deal in which he said that the program should be revised if its terms place “unbearable” pressure on the public.

The economic reforms recommended by the IMF, geared toward privatization, lifting subsidies and reducing state expenditure, have raised the prices of basic commodities and therefore raised the pressure on the purchasing power of many Egyptian households.

Prime Minister Mostafa Madbuly reiterated Sisi’s comments on the loan agreement with the IMF during a Cabinet meeting on Wednesday, adding that when Egypt agreed to the loan program with the IMF in 2022, it was according to specific circumstances and an agreed-upon timeframe in the context of the economic fallout of the Russian invasion of Ukraine.

He added that unprecedented events have since unfolded in the region, citing the Israeli aggression on Gaza and Lebanon and their regional implications, including the decline in Suez Canal revenues. Madbuly asked the IMF to take the new circumstances into account. 

Yet while acknowledging that the country has suffered great burdens given the wars in Gaza and Sudan, the IMF director stressed on Thursday that it is better for Egypt to initiate the reforms sooner rather than later.

This is not the first time that Egypt has pushed for delays. After nearly a year of stalling on several IMF conditions, namely a flexible exchange rate, Egypt and the fund formally agreed to augment the value of the loan from $3 billion to $8 billion in March, despite what the IMF called “non-compliance” on Egypt’s part.

In July, the IMF also rescheduled the third review of Egypt's loan program to provide the government with a grace period to approve increases to fuel prices and electricity tariffs, sources in the petroleum and finance sectors and an MP told Mada Masr at the time on condition of anonymity. 

In the new policy prescriptions, the IMF asked Egypt to rein in “unaffordable energy subsidies” and raise fuel prices in accordance with the rates mandated by Egypt’s Fuel Automatic Pricing Committee and redirect government spending toward supporting vulnerable segments of society.

Georgieva added on Thursday that abandoning the program requirements would ultimately “raise the cost,” without elaborating further.

The government has raised fuel prices three times this year alone — the latest of which came on Friday — with rates increasing by 32-63 percent over the past year. The move comes as part of the state’s economic reforms to gradually phase out fuel subsidies by the end of 2025 in line with IMF recommendations. The date was confirmed by Prime Minister Mostafa Madbuly on Saturday.

Electricity prices were also raised two times since the beginning of the year, once in January and the other in August, pushing electricity prices up by nearly 74 percent. The government also raised the prices of cooking gas cylinders by about 50 percent in September.

But the government has been slow to phase out subsidies and moving toward cash subsidies to the most vulnerable, which experts had previously told Mada Masr could reduce the eligibility pool, saying it could spark public outrage.

During its August review, the IMF stated that Egypt made “financial reform” pledges with the aim of improving the state’s revenues, or the general budget, in order to control borrowing and redirect spending to social subsidies for the vulnerable.

Prime Minister Mostafa Madbuly indicated in July that the ongoing loan program with the IMF, which ends in 2026, would be Egypt’s last.

Egypt has taken four loans from the IMF since 2016.