Egypt has $5bn-6bn financing gap

Egypt is seeking $5bn in bilateral financing to complement the $12bn that the IMF plans to lend Cairo to support the fund’s three-year economic stabilisation programme, the IMF’s Middle East & Central Asia department director Masood Ahmed said at a press conference in Washington yesterday.

He said approval of financing from the fund is conditional on Cairo securing the bilateral finance.

“…we’ve reached the staff level agreement (about the $12bn from the fund) in August,” Ahmed said. “We are moving forward now to wrap up the financing required to close the financing gap for the first year…We need to show that it is fully financed for the first year, at least, and hopefully for more than the first year.”

“… there’s a gap of between $5 and $6 billion of bilateral financing which would come on top of the financing from the IMF, the financing from The World Bank and other regional development banks, and financing that had been already identified from bilaterals, so this was in addition to what was needed, we needed to close the gap.”

Ahmed said the IMF has been in contact with China,Saudi Arabia and some G7 countries about providing the required bilateral financing.

“… we are making very good progress on it, and I’m hopeful that we will be able to be in a position to firm up these financing pledges, in the coming weeks,” Ahmed said.

Ahmed said the IMF hopes to approve the $12bn financing and the economic stabilisation programme by the end of October or the start of November.

This would allow the first $2.5bn tranche of the IMF financing to be provided “within days”.

“… the challenge for the Egyptian economy is …, first of all, to stabilize the macro economy by containing the budget deficit by reducing the vulnerability that comes from debt levels which have been rising, so turn it around and try to bringing debt levels down by getting rid of the imbalance in the foreign exchange market…,” Ahmed said.