Directions came President Sisi After the government announced an increase Fuel prices For the third time this year, by a rate ranging between 11 percent and 13 percent, with the aim of reducing the gap between the selling prices of petroleum products and their high production and import costs, a step that would increase the rates of Inflation The high levels that Egyptians suffer from.
This increase contributed to more anxiety among Egyptians, who feared the consequences of the decision regarding an increase in… Commodity prices And services, after the prices of many goods and services have recently moved, such as electricity And tickets Metro And trains, especially in light of the Fund’s adherence to its demands to lift government support for services and liberalize Exchange rate.
Presidential directives and government response
And it was Egyptian President Abdel Fattah El-Sisi recently confirmed that his government may have to review its agreement with the International Monetary Fund, if it leads to pressure that “public opinion cannot bear” due to the challenges resulting from the current regional situation, after the latest increase in fuel prices, approved by Egypt, on Friday morning. Before the past.
Al-Sisi, who was speaking at the opening of a conference on population, health and human development in Cairo, said:
- Egypt It is implementing the current economic reform program (under which it obtained an $8 billion loan from the International Monetary Fund) under extremely difficult regional and international conditions that have negative impacts.
- During the last ten months, Egypt lost $6 or $7 billion, which is the size of the decline in revenues Suez Canal.
- This situation “can last for a whole year.”
- If this challenge will cause pressure on public opinion in a way that citizens cannot bear, the situation must be reviewed with the International Monetary Fund.
Later – after President Sisi’s statements – Egyptian Prime Minister Dr. Mostafa Madbouly said during a press conference a few days ago that the government aims to review timings and targets. Economic reform programme With the International Monetary Fund, he explained that:
- The economic reform program was set with specific goals and timing, but developments emerged such as the Gaza War and the Lebanon War, and a decline Suez Canal revenues.
- The International Monetary Fund mission will come to Egypt to conduct the fourth review of the economic reform program and we will discuss with them the review of the program.
How did the IMF react?
In the first comment following the statements of the political leadership in Egypt, the International Monetary Fund said that the size of the loan program provided to Egypt, amounting to eight billion dollars, “is still appropriate,” and that the Fund will make it a priority to evaluate the effectiveness of the programs. Social protection In the country, he is also working with the Egyptian authorities on what needs to be done to expand the scope of social protection programs and ensure their effectiveness.
The Director of the International Monetary Fund announced, Kristalina GeorgievaShe will travel to Egypt within days to closely examine the difficult economic situation in the country and stress the need to adhere to the implementation of reforms. She stated in a press conference that:
- Egyptian economy It faces challenges due to the wars in Gaza, Lebanon and Sudan, amid the loss of 70 percent of Suez Canal revenues.
- We were very open to modifying the Egyptian program or any other program to best serve the people… But let me say that we will not do what needs to be done for the country and the people of the country if we pretend that the action that needs to be taken can be reversed.
In its last report this October, regarding growth expectations Global economy During the current and next years, the International Monetary Fund expects the Egyptian economy to grow by 2.7 percent during the current year, and by 4.1 percent during the next year.
Stressful economic situation
For his part, the Director of the Egypt Center for Economic Studies, Dr. Mustafa Abu Zaid, explained in exclusive statements to the “Eqtisad Sky News Arabia” website that the economic situation is very stressful in Egypt. Due to the rise in the inflation rate to 26.4 percent in September compared to 26.2 percent in August. The Egyptian government also moved forward with liberalizing energy prices and their direct impact on the prices of goods and products.
He explained that this represents a strong challenge and a huge burden on citizens, which prompted Egyptian President Abdel Fattah El-Sisi to ask his government to review the International Monetary Fund regarding economic reform measures that would reduce the pressure on citizens.
It is likely that the International Monetary Fund will try, based on negotiations with the Egyptian government, to extend the deadline for some requirements in the reform program, especially with regard to liberalizing energy prices, which it had announced would be completely liberalized by the end of 2025, explaining that if the Fund agrees to this, it will allow the Egyptian government time to Addressing inflation in a manner consistent with the procedures of the Central Bank of Egypt.
He believed that according to the recent statements of the Director of the International Monetary Fund, during which she indicated that the Fund is fully aware of the challenges facing the Egyptian economy due to tensions in the Middle East region, especially in the Red Sea, this means that it is possible to show more flexibility with the Egyptian economic program, and on the other hand The other: The Egyptian state shows a clear commitment to implementing the program, taking into account the internal situation and the measures it requires to protect the most vulnerable and poorest classes.
- Egypt’s inflation rate had been trending downward from a peak of 38 percent in September 2023, but it rose unexpectedly in August and September 2024.
- Inflation recorded 26.2 percent in August, up from 25.7 percent in July, before continuing to accelerate to 26.4 percent in September.
Good timing
For his part, World Bank Advisor, Dr. Mahmoud Anbar, explained in exclusive statements to the “Eqtisad Sky News Arabia” website that the Egyptian President’s statement that the current circumstances require reviewing the IMF and agreeing with it about the treatment prescription he wants from the Egyptian state came at the right time.
He stressed that canceling fuel subsidies in light of the current circumstances is a burden on the citizen and increases the number of poor people in the country and the cost that the citizen can bear, stressing that Egyptians bear the cost for the sake of development, but it is a high cost.
He also stressed that there is a need for the Fund not to be left alone to determine development strategies within the Egyptian state, and not to set the treatment prescription for the Egyptian economy alone, attributing this to the fact that Egypt is a country whose citizens are mostly middle- and low-income, who constitute a work force and have direct impacts on production. Whether with regard to the size of their real income or their ability to consume and the purchasing power of their real income.
He added: With purchasing power declining to this extent, the matter has consequences that are not positive at all. Economic growth may be achieved, but economic development is not achieved, explaining that the difference between this and that is huge (..).
He stressed that the IMF’s prescription must be in line with conditions at the international and regional levels, in addition to the local level, and explained:
- At the regional level, according to Prime Minister Mostafa Madbouly, the Egyptian state may resort to the so-called war economy. How will this prescription be compatible with the war economy in light of the complete change in ideology?
- The situation is volatile in the Middle East and the geopolitical changes that are occurring are faster than the changes on the economic level.
- The government of Egypt must completely reject the intervention of the IMF and its treatment prescription, without interference from the state and taking into account the circumstances at the global and regional levels and also at the local level by knowing the extent of the citizen’s ability to bear this matter or not.
- The Fund does not take into account, for example, the Russian-Ukrainian crisis or the division of the world into two camps, nor is it among its priorities the idea of support in its absolute sense. It does not care about the suffering of citizens or the increase in the number of poor people. It always seeks to have a relationship with the supply side, not the demand, and seeks to reduce support. In preparation for its complete abolition.
Fuel prices
For his part, Director of the Vision Center for Economic Studies, Bilal Shuaib, explained in statements to the “Eqtisad Sky News Arabia” website that Egyptian President Abdel Fattah El-Sisi clearly felt the anger of the Egyptians regarding the issue of lifting subsidies, which prompted him to demand a review of the terms of the International Monetary Fund so that some of them are modified. Especially with regard to the fuel subsidy policy in Egypt.
Regarding the issue of fuel subsidies in Egypt, he explained that the Egyptian state continues to support fuel by imposing allocations for it in the state’s general budget, as the energy subsidy allocations in the 2024-2025 budget reach 154 billion pounds (..).
He stated that the Egyptian street was greatly concerned, especially since the recent increase in the price of fuel was the third in a row within a year, and thus the total increases that occurred during this year are estimated at between 30 to 31 percent. He explained that this increase created a problem with inflation rates, which the state is fighting, continuing: The Central Bank fixed the price Interest Fearing sudden changes in inflation indicators.
And he didn’t change Central Bank of Egypt Since interest rates were raised by 600 basis points in an extraordinary meeting in March within the framework of a loan agreement with the International Monetary Fund, its size has been increased to eight billion dollars. This increase came after a 200 basis point increase on the first of February.
Shuaib stressed that there is a need for the Fund to be convinced of the review, in light of the countries of the world being exposed to economic crises and challenges, which subsequently affected the Egyptian economy, and he explained that:
- Geopolitical tensions have a direct impact on the deteriorating economic conditions in the world.
- The tensions in the Red Sea (..) greatly affected Suez Canal revenues, which decreased by more than seven billion dollars.
He stated that the economic prescription set by the International Monetary Fund for countries is of course not suitable for all countries, noting that this prescription had previously failed in a number of countries such as Greece Argentina and Brazil. Therefore, the Fund must take into account the demographic composition of the population, population trends, and the economic situation of the country.
