Egypt may need to slow down the pace of projects than originally planned to avoid damaging its macroeconomic stability, Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva said during a press briefing held on Thursday.

Georgieva’s statements come amid preparations for a review of the country’s crucial $3 billion rescue package.

The IMF and Egypt “agreed on a sound program” with pillars that include implementing a freer exchange rate and boosting the private sector, the nation needs to “moderate the long-term investment projects that are indeed very important and very good for Egypt,” Georgieva indicated.

The IMF approved in December 2022, a 46-month arrangement under the Extended Fund Facility (EFF) for Egypt to receive a loan of $3bn. The agreement is expected to catalyze additional financing of about $14bn from Egypt’s international and regional partners, including new financing from GCC countries and other partners through the ongoing divestment of state-owned assets as well as traditional forms of financing from multilateral and bilateral creditors.

Egypt, IMF yet to agree on review date

However, Egypt and the International Monetary Fund have yet to agree on a date for the initial review under the agreement signed in December, Jihad Azour, director of the IMF’s Middle East and Central Asia Department, told a news conference on Thursday.

He added that among priorities were for Egypt to adopt a flexible exchange rate, reduce inflation by using monetary policy instruments, especially interest rates, and open more space for the private sector by levelling the playing field with state companies.

Following the review, Egypt will receive a tranche worth $347m (equivalent to 261.13 million Special Drawing Rights units), which is the same value as the first tranche it obtained after signing the loan agreement in December 2022.

In February, Egypt’s Prime Minister revealed that 32 state-run companies will be offered to the private sector through the Egyptian Exchange or selling stakes to strategic investors, or both together, through a year ending in March 2024.

The program will include two companies affiliated with the military investment arm the National Service Projects Organization (NSPO), which are the filling station Wataniya and the bottled water company Safi.

The IMF 46-month programme aims to support both short- and medium term goals and will be based on three broad pillars:

First, the exchange rate and monetary policies should focus on restoring external resilience and maintaining price stability will be critical to absorb external shocks, including the ongoing spillovers from the war, improve the functioning of the FX market, rebuild reserve buffers, and anchor inflation developments.

Second, the fiscal discipline and fiscal structural policies will maintain market confidence and ensure the downward trajectory of the debt-to-GDP ratio while strengthening the budgetary process and improving the budget composition to make room for social spending.

Third, the broad-based structural reforms will reduce the state footprint and increase the role of the private sector in the economy will focus on the gradual exit of the public sector from non-strategic sectors, levelling the playing field between state-owned enterprises (SOEs) and private companies, removing barriers to trade, and enhancing transparency and governance in the public sector.

In a recent report, the International Monetary Fund downgraded its forecast for Egypt’s GDP growth rate to 3.7% in 2023, down from previous forecasts of 4% in January.

It also lowered its forecast for Egyptian economic growth in 2024 to 5%, down from the 5.3% it expected in January.

The IMF’s projections for Egypt’s GDP growth fall below the Egyptian government target of 4.1% GDP growth target in fiscal year (FY) 2023/24, which starts 1 July.

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