IMF Managing Director Christine Lagarde said that Egypt has “almost completed” the actions required for the International Monetary Fund’s board to review its $12 billion loan accord, but some measures related to the exchange rate and subsidies are still pending.
Lagarde said at a press briefing in Washington,”There are several prior actions which need to be completed before the board can actually meet.”
“To my knowledge, these prior actions are almost completed – not quite -in relation to both exchange rate and in relation to subsidies, there is still a little bit of implementation to be had before the board can meet,”she added.
Lagarde concluded that she hopes,”that the board can meet promptly, and then once the board has met, it will have meant that the prior actions are completed, and therefore the first tranche can be released.”
According to Bloomberg, “These comments will likely add to speculation that Egyptian policy makers will cut subsidies and devalue the pound before the IMF board meets and not after securing the first installment of the loan. The pound has plunged to record lows in recent days on the black market on speculation a devaluation was imminent.”
Jean-Paul Pigat, senior economist at Dubai-based Emirates NBD PJSC, said in a Bloomberg Television interview, “It’s inevitable at this point that they’re going to devalue.”
He added, “If they want to sign the agreement or if they want the executive board to approve it, they’re going to need to loosen their controls.”
The benchmark EGX 30 Index for stocks gained 0.6 %to 8,414.27, the highest intra-day level since August 18, at 11:16 a.m. in Cairo. The measure has climbed 20 %this year.
The central bank devalued the Egyptian currency by more than 10 %in March and parliament passed a law punishing illegal currency trading in the parallel market by jail.
However, the Central Bank Governor Tarek Amer said in July that defending the exchange rate over the past five years was a “grave mistake.”