Egypt: Has the country actually fallen under foreign mandate amid its most recent IMF deal?

Egyptians wonder whether their country has officially fallen under international and regional mandate after its most recent deal with the International Monetary Fund, which was announced on 27 October 2022.

The International Monetary Fund (IMF) and Egypt have reached a $3 billion funding deal that will run over 46 months, the IMF’s representative in Egypt, Ivana Holler, said on Thursday in remarks aired on state TV, reported Reuters.

In a press conference held on Thursday in Cairo, Egypt’s Minister of Finance Mohamed Maait explained that the IMF’s $3 billion loan is a part of a $9 billion finance scheme that is expected to include one billion dollars from the sustainbility fund and $5 billion by the country’s development partners, according to Ahram online.

Prime Minister Mostafa Madbouly, Minister of planning and Economic Development hala El-Said and the Governor of the Central Bank of Egypt Hassan Abdalla attended the conference.

Also, Rassd News Network reported the news about the deal concluded by the IMF and Egypt in a tweet on its Twitter account, stating that:

“The government says that Egypt will receive $3 billion from the International Monetary Fund, $1 billion from the IMF’s Extended Fund Facility (EFF), and about $5 billion from partner countries and other international institutions.”

“The program aims to provide Egypt with balance of payments and budget support while catalyzing additional financing from Egypt’s international and regional partners to maintain economic stability, address macroeconomic imbalances and spillovers from the war in Ukraine, protect livelihoods, and push forward deep structural and governance reforms to promote private sector-led growth and job creation,” according to IMF Mission Chief for Egypt Ivanna Vladkova Hollar.

“Egypt’s international and regional partners will play a critical role in facilitating the implementation of the authorities’ policies and reforms, revealing that additional financing of about $5 billion is projected to be provided through multilateral and regional partners during current  FY2022/2023, which ends in June 2023, which will help strengthen Egypt’s external position,” read a statement released by the IMF on Thursday.

Commenting on Egypt’s IMF deal, Dr. Nayel Shafei, an Egyptian academic, tweeted, saying:

Egypt is now under mandate. The International Monetary Fund statement and loan terms state that: “Egypt’s international and regional partners will play a critical role in facilitating the implementation of the authorities’ policies and reforms.”

Also, Dr. Mahmoud Wahba from New York, who identifies himself as: an academic turned entrepreneur, commented on Egypt’s deal with the IMF, in his Twitter account, saying:

“Egypt is under regional supervision as a condition for the IMF loan.  How does this happen in this era before our very eyes?,” he wondered.

In another tweet, Wahba said: “Handing Egypt over to its neighbors, handing Egypt over to its neighbors. Egypt is under mandate, you traitors! – according to the IMF statement and loan conditions: 

(Egypt’s international and regional partners will play a critical role in facilitating the implementation of the authorities’ policies and reforms.) Who are the regional partners? Gulf countries? And Israel?,” he wondered.

Earlier on Thursday,  in an unscheduled meeting , the Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) announced raising the key interest rates ( by two percent (200 bps) to reach 13.25 percent, 14.25 percent, 13.75 percent, and 13.57 percent for the overnight deposit rate, the overnight lending rate, the rate of the main operation, and the discount rate, respectively.

In a statement, the CBE attributed its decision action to elevated global and domestic prices that are expected to keep headline inflation above the MPC’s preannounced target of seven percent (±2 percent) on average in through the fourth quarter of 2022.

The decision aims to uphold the CBE’s mandate of ensuring price stability in the local market over the medium term, the statement noted.

It also aims to anchor inflation projections and also to contain demand side pressures and higher broad money growth as well as the second round effects of supply shocks.

Following the decision, the Egyptian pound slumped its lowest level against the US dollar since the implementation of the economic reform programme in November 2016, with the exchange rate surpassing EGP 20 to the dollar.

Egypt’s economic crisis

Egypt has recently been experiencing a real economic crisis, reflected in sequential rises in commodity prices and the decline in the country’s fixed foreign exchange reserves, which has caused a significant drop in the value of the pound against the dollar, even before the most recent devaluation.

Despite what the Egyptian media may say, that the crisis is one of the results of the disruption in supply chains caused by the Corona pandemic and the Russian-Ukrainian war, observers and economists believe that the crisis is rather complicated and driven by internal and external reasons that brought the country’s fragile economy to its knees.

Everyone agrees that this crisis is the worst in decades, as Egypt’s Abdel Fattah al-Sisi called it ‘unprecedented’ on a telephone interview with a TV program.

The crisis prompted Sisi to announce the state’s intention to hold a national dialogue on various issues and to ease the tension in society that has grown over the past years due to the backdrop of strict measures to combat terrorism and other difficult economic measures that have burdened the middle and poor classes, with a first-of-its-kind gesture.

Sisi also announced that the Presidential Amnesty Commission has become operational to release additional number of detainees in freedom cases.

He also called on the Government to convene a global conference to reveal its future plans to encourage and facilitate the work of the domestic and foreign private sector.

The government also announced its intention to implement a privatization program to sell approximately $40 billion worth of government assets over the next four years. It also brought up for public discussion a draft document titled “The State’s ownerships”, which includes sectors that it plans to leave once and for all, whose contribution it will reduce, and those that want to stabilize its share.

This document can be an encouraging roadmap for investors.

All these steps represent significant and huge retreats in the course of action of the Egyptian state since the 2013 coup against the country’s first democratically elected president, and further worsened since Sisi officially came to power in 2014.

In spite of the doubts about the seriousness of the planned national dialogue and the feasibility of the steps to stimulate the work of the private sector, in light of the regime’s refusal to accept criticism and the growing dominance of the state through the military over the economy, everything that has been announced, reflects the extent of the predicament experienced by the Egyptian economy, where borrowing has put the country’s economy in a vicious circle.