Egypt and the International Monetary Fund (IMF) have reached on Wednesday staff level agreement on a set of comprehensive policies and reforms needed to complete the first and second reviews under the Extended Fund Facility (EFF) arrangement. "Amid significant macroeconomic challenges that have become more complex to manage with the impact of the recent conflict in Gaza on tourism and Suez Canal receipts, staff also considered the authorities' request for an augmentation of IMF support to Egypt from SDR 2.35 billion (equivalent to about US$ 3 billion) to SDR 6.11 (equivalent to about US$ 8 billion)." Ivanna Vladkova Hollar, Head of IMF mission in Cairo, said in a statement. This agreement is subject to approval by the IMF Executive Board, Hollar added. "The comprehensive policy package seeks to preserve debt sustainability, restore price stability, and reinstate a well-functioning exchange rate system, while continuing to push forward deep structural reforms to promote private sector-led growth and job creation." The IMF official further said that the Egyptian authorities "are showing strong commitment to act promptly on all critical aspects of their economic reform programme supported by the IMF. Policy discussions and programme reforms revolved around six pillars." "First, the authorities have taken decisive steps to move toward a credible flexible exchange rate regime. This reform, which has started with the unification of the exchange rate between the official and parallel markets will (i) help increase the availability of foreign exchange and eliminate the current backlog of unmet foreign exchange demand, and (ii) re-establish a well-functioning interbank market for foreign exchange. There was agreement that a flexible exchange rate regime would help Egypt manage external shocks and would support the authorities' decision to move toward a full-fledge inflation targeting regime over time." "Second, additional monetary policy tightening to reduce inflation, and reverse the recent dollarisation trend. In this regard, we welcome the recent decision by the Central Bank of Egypt to increase the policy rate by 600 basis points, in addition to the 200 basis points undertaken last month."
