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Egypt, IMF to cut budget deficit to 5.5% during 3-year funding programme Primary agreement between IMF and Egypt; IMF executive board to determine timing of payment tranches
The Central Bank of Egypt (CBE) should be attentive in monitoring the foreign exchange market and intervene to regulate it based on supply and demand, according to the head of the International Monetary Fund (IMF) mission to Cairo Chris Jarvis. Jarvis added that Egypt had surpassed the global financial crisis of 2008, which assured the IMF that it is capable of surviving the current economic situation. He added that the government has to cut interest rates on debt as a step to control the inflating public debt. Jarvis explained that the budget deficit has to be cut to about 5.5% over the timeline of the funding programme. Additionally, the public debt rate should not exceed 88% during the programme period. The head of the IMF mission called on the government to reconsider the domestic borrowing interest rates, but did not explain how to approach the matter. According to a statement issued by the IMF on Thursday, the CBE and the IMF reached a staff-level agreement on a three-year extended fund facility (EFF) of SDR 8.5966bn, equivalent to about $12bn. CBE governor Tarek Amer said that Egypt is suffering from large fiscal and monetary imbalances that are constraining the current administration's ability to achieve the desired growth and development, as domestic savings alone will not develop Egypt. Amer noted that the signing of the loan grants Egypt more confidence in its economic reform programme and reduces pressure on the foreign exchange market. "The agreement is considered the foundation of Egypt's economic development, and we will work on improving the business climate and broadening the ownership of public companies through the capital market," Amer added. On his part, Minister of Finance Amr El-Garhy said that the IMF is driving Egypt to strengthen safety nets and social protection as part of the economic reform programme. This will happen through restructuring the subsidy system and directing its proceeds to social protection programmes.
