Failure to implement reforms could plunge Egypt back into financial turmoil – IIF

Failure to implement reforms could plunge Egypt back into financial turmoil – IIF

Failure to implement deep structural reforms and continue with the IMF program could plunge Egypt back into financial turmoil, The Institute of International Finance (IIF) has warned. In December 2022, the IMF approved a $3 billion Extended Fund Facility loan for Egypt whose finances, under pressure for long, was further hit by the economic fallout of the war in Ukraine. The IMF loan package, however, came with conditions that include a shift to a flexible exchange-rate regime, controlling inflation using monetary policy instruments, and structural reforms. The fund is now waiting to see Egypt carry out the pledges before reviewing the rescue program. Any financial turmoil "will have dire repercussions for the region, as it would destabilize a major political and military power. However, proper reform implementation can revitalize the private sector, encourage non-hydrocarbon exports, help diversify the economy, and bring a stable flow of capital into Egypt and the region," IIF said in a recent report. Egypt's problems include both current account and fiscal deficits, high debt amortization, portfolio outflows, and a large net foreign liability position of the banking system. "The shortfall in foreign exchange that this has created, along with persistent exchange rate mismanagement, has put serious