IMF loan could be back on the table for Egypt



Egypt’s on-off talks with the IMF may be back on again, as investors say IMF loans offer a stronger platform for reviving the economy than the Arabian Gulf money keeping it afloat.

Even with signs of a recovery in tourism and investment, the gap between Egypt’s foreign currency receipts and needs may reach US$15 billion a year by 2017, said Jason Tuvey, a London-based analyst at Capital Economics. Support from GCC countries is “keeping strains in its balance of payments contained”, but it’s “not a long-term solution”, he said.

In the political upheaval that followed the revolt of 2011 and the army takeover two years later, as investors fled and currency reserves plunged, Egypt turned to the GCC. First Qatar and later Saudi Arabia and the UAE obliged, with more than $40bn in grants, loans and investment to prop up sympathetic governments. Meanwhile, repeated talks with the IMF broke off short of a loan accord.

The government, headed by the former general Abdel Fattah El Sisi, has not ruled out a loan from the IMF, although the deputy finance minister, Ayman El Kaffas, denied a report in El Watan newspaper last week that a $6bn deal would be discussed with IMF officials in Cairo next month. The government also plans a eurobond sale, Egypt's first since 2010.

For bond investors, “IMF funding is seen as superior,” said Sergey Dergachev, a senior money manager at Union Investment Privatfonds in Frankfurt. It means “some sort of fiscal discipline, prudent debt management policies”.

Mr El Sisi is already enacting some policies the IMF typically requires as conditions for loans. Egypt slashed fuel subsidies last year and aims to cut its budget deficit by at least 1.5 percentage points to 10.5 per cent of economic output this year.

The fund would be likely to require faster action on that and other issues, and that would be a good thing, according to Lutz Roehmeyer, the director of fund management at Landesbank Berlin Investment.

“Investors so far have the impression that politics and reforms are moving too slowly in Egypt,” he said. “An IMF programme would increase certainty that there will be a reform agenda.”

The IMF this week criticised Egypt’s decision to delay imposing a capital gains tax on stock investors. Chris Jarvis, head of the fund’s Egypt mission, also said the government had not requested IMF financing.

Bolstered by the GCC handouts, Mr El Sisi’s government has steadied the economy and spurred a market rally.

GDP is expected to grow by at least 4 per cent this fiscal year, its best performance since the 2011 uprising. The benchmark stock index is up more than 80 per cent since the army takeover in July 2013, while the yield on Egypt’s dollar bonds maturing in 2020 has plunged close to 4 per cent from almost 11 per cent.

Egypt sought to market its fledgling recovery at an investor conference in March, where the government says it got pledges worth $36bn. Most of them came from the GCC, including a $6bn deposit in the central bank that helped to replenish international reserves.

That cash may not last long, though. Egypt has $4.45bn in foreign currency commitments this year, according to the Cairo-based investment bank EFG Hermes. Those include repaying $1bn to Qatar, which has fallen out with Egypt since the army takeover, and $700 million to Paris Club debtors. The government also owes money to international oil companies.

From the government’s point of view, there are drawbacks to IMF funding, according to Mr Tuvey. “Egyptian authorities would prefer not to be tied down by an IMF financing package and instead undertake economic reforms at its own pace and rely on financing from the Gulf as a backstop,” he said.

Egypt is not seeking an IMF loan because the pace of required reforms may not be compatible with social conditions in the country, the state-run news agency quoted the international cooperation minister Naglaa El Ahwany as saying on Wednesday.

Many economists, though, believe that the squeeze on Egypt’s finances will force the government to overcome any such scruples.

“Sooner or later, we will have to resort to the IMF,” said Omar El Shenety, the managing director at the Cairo-based investment bank Multiples Group. “For credibility first, before its money.”

business@thenational.ae

Follow The National's Business section on Twitter

Section 375

Cast: Akshaye Khanna, Richa Chadha, Meera Chopra & Rahul Bhat

Director: Ajay Bahl

Producers: Kumar Mangat Pathak, Abhishek Pathak & SCIPL

Rating: 3.5/5

if you go

The flights

Etihad and Emirates fly direct from the UAE to Seoul from Dh3,775 return, including taxes

The package

Ski Safari offers a seven-night ski package to Korea, including five nights at the Dragon Valley Hotel in Yongpyong and two nights at Seoul CenterMark hotel, from £720 (Dh3,488) per person, including transfers, based on two travelling in January

The info

Visit www.gokorea.co.uk

The specs

Engine: 0.8-litre four cylinder

Power: 70bhp

Torque: 66Nm

Transmission: four-speed manual

Price: $1,075 new in 1967, now valued at $40,000

On sale: Models from 1966 to 1970

The specs

Engine: Dual permanently excited synchronous motors
Power: 516hp or 400Kw
Torque: 858Nm
Transmission: Single speed auto
Range: 485km
Price: From Dh699,000

Race card

5pm: Maiden (PA) Dh80,000 (Turf) 1,600m
5.30pm: Handicap (PA) Dh80,000 (T) 1,600m
6pm: Arabian Triple Crown Round-1 Listed (PA) Dh230,000 (T) 1,600m
6.30pm: Wathba Stallions Cup Handicap (PA) Dh70,000 (T) 1,400m
7pm: Maiden (PA) Dh80,000 (T) 1,200m
7.30pm: Handicap (TB) Dh100,000 (T) 2,400m

Company Profile

Company name: Namara
Started: June 2022
Founder: Mohammed Alnamara
Based: Dubai
Sector: Microfinance
Current number of staff: 16
Investment stage: Series A
Investors: Family offices

COMPANY PROFILE

Name: Kinetic 7
Started: 2018
Founder: Rick Parish
Based: Abu Dhabi, UAE
Industry: Clean cooking
Funding: $10 million
Investors: Self-funded

KEY DATES IN AMAZON'S HISTORY

July 5, 1994: Jeff Bezos founds Cadabra Inc, which would later be renamed to Amazon.com, because his lawyer misheard the name as 'cadaver'. In its earliest days, the bookstore operated out of a rented garage in Bellevue, Washington

July 16, 1995: Amazon formally opens as an online bookseller. Fluid Concepts and Creative Analogies: Computer Models of the Fundamental Mechanisms of Thought becomes the first item sold on Amazon

1997: Amazon goes public at $18 a share, which has grown about 1,000 per cent at present. Its highest closing price was $197.85 on June 27, 2024

1998: Amazon acquires IMDb, its first major acquisition. It also starts selling CDs and DVDs

2000: Amazon Marketplace opens, allowing people to sell items on the website

2002: Amazon forms what would become Amazon Web Services, opening the Amazon.com platform to all developers. The cloud unit would follow in 2006

2003: Amazon turns in an annual profit of $75 million, the first time it ended a year in the black

2005: Amazon Prime is introduced, its first-ever subscription service that offered US customers free two-day shipping for $79 a year

2006: Amazon Unbox is unveiled, the company's video service that would later morph into Amazon Instant Video and, ultimately, Amazon Video

2007: Amazon's first hardware product, the Kindle e-reader, is introduced; the Fire TV and Fire Phone would come in 2014. Grocery service Amazon Fresh is also started

2009: Amazon introduces Amazon Basics, its in-house label for a variety of products

2010: The foundations for Amazon Studios were laid. Its first original streaming content debuted in 2013

2011: The Amazon Appstore for Google's Android is launched. It is still unavailable on Apple's iOS

2014: The Amazon Echo is launched, a speaker that acts as a personal digital assistant powered by Alexa

2017: Amazon acquires Whole Foods for $13.7 billion, its biggest acquisition

2018: Amazon's market cap briefly crosses the $1 trillion mark, making it, at the time, only the third company to achieve that milestone

COMPANY PROFILE

Company name: Revibe
Started: 2022
Founders: Hamza Iraqui and Abdessamad Ben Zakour
Based: UAE
Industry: Refurbished electronics
Funds raised so far: $10m
Investors: Flat6Labs, Resonance and various others

‘FSO Safer’ - a ticking bomb

The Safer has been moored off the Yemeni coast of Ras Issa since 1988.
The Houthis have been blockading UN efforts to inspect and maintain the vessel since 2015, when the war between the group and the Yemen government, backed by the Saudi-led coalition began.
Since then, a handful of people acting as a skeleton crew, have performed rudimentary maintenance work to keep the Safer intact.
The Safer is connected to a pipeline from the oil-rich city of Marib, and was once a hub for the storage and export of crude oil.

The Safer’s environmental and humanitarian impact may extend well beyond Yemen, experts believe, into the surrounding waters of Saudi Arabia, Djibouti and Eritrea, impacting marine-life and vital infrastructure like desalination plans and fishing ports. 

MEDIEVIL (1998)

Developer: SCE Studio Cambridge
Publisher: Sony Computer Entertainment
Console: PlayStation, PlayStation 4 and 5
Rating: 3.5/5

Hamilton’s 2017

Australia - 2nd; China - 1st; Bahrain - 2nd; Russia - 4th; Spain - 1st; Monaco - 7th; Canada - 1st; Azerbaijan - 5th; Austria - 4th; Britain - 1st; Hungary - 4th; Belgium - 1st; Italy - 1st; Singapore - 1st; Malaysia - 2nd; Japan - 1st; United States - 1st; Mexico - 9th

FROM THE ASHES

Director: Khalid Fahad

Starring: Shaima Al Tayeb, Wafa Muhamad, Hamss Bandar

Rating: 3/5

SPECS

Engine: 4-litre V8 twin-turbo
Power: 630hp
Torque: 850Nm
Transmission: 8-speed Tiptronic automatic
Price: From Dh599,000
On sale: Now

Herc's Adventures

Developer: Big Ape Productions
Publisher: LucasArts
Console: PlayStation 1 & 5, Sega Saturn
Rating: 4/5

PSG's line up

GK: Alphonse Areola (youth academy)

Defence - RB: Dani Alves (free transfer); CB: Marquinhos (€31.4 million); CB: Thiago Silva (€42m); LB: Layvin Kurzawa (€23m)

Midfield - Angel di Maria (€47m); Adrien Rabiot (youth academy); Marco Verratti (€12m)

Forwards - Neymar (€222m); Edinson Cavani (€63m); Kylian Mbappe (initial: loan; to buy: €180m)

Total cost: €440.4m (€620.4m if Mbappe makes permanent move)

UAE currency: the story behind the money in your pockets