The IMF Confirms Its "Strong" Support for Egypt Amid Iranian War Pressures

SadaNews - Kristalina Georgieva, the Director of the International Monetary Fund, confirmed the institution's strong support for Egypt during a meeting with President Abdel Fattah El-Sisi on the sidelines of the "Africa Forward" summit held in Kenya.

Georgieva stated in a post on the "X" platform that she discussed with El-Sisi the global implications of the Iranian war, along with Egypt's economic reform efforts, adding that she assured the Egyptian president of the "strong support of the Fund."

The meeting comes as the IMF sees that the economic reforms implemented by Egypt, particularly the flexibility of the exchange rate and building a higher level of reserves and safety margins, have helped the country absorb part of the shocks from the war, despite ongoing pressures related to energy prices, inflation, and capital movements.

Jihad Azour, Director of the Middle East and Central Asia Department at the Fund, told "Asharq" that the war's repercussions on the Egyptian economy remain "relatively limited," after authorities allowed the exchange rate to play the primary defense role against shocks, alongside rising energy prices and focusing subsidies on the most needy groups.

However, he urged Egypt to monitor the impact of rising energy prices on inflation during the upcoming period, indicating that if price pressures continue, the authorities, like any other country, should activate monetary policy tools.

The War Keeps Inflationary Pressures Present

The Fund Director's statements came while inflationary pressures remain present in Egypt, despite the annual inflation rate in cities slowing to 14.9% in April from 15.2% in March.

The Central Bank kept interest rates unchanged at 19% for deposits and 20% for lending, expecting inflation to accelerate again due to the war's repercussions and rising commodity and energy prices.

The Central Bank also lowered its real GDP growth expectations to 4.9% and 4.8% for the current and next financial years, respectively, compared to previous expectations of 5.1% and 5.5%, anticipating a slowdown in economic activity under the pressure of the war's repercussions.

The IMF had raised the value of its financing program for Egypt to $8 billion in early 2024, as part of a reform package that included greater currency liberalization, while Georgieva stated earlier that there are currently no discussions on increasing the loan amount.