Unexpected developments regarding Egypt’s fifth tranche of the International Monetary Fund (IMF) loan suggest that slow progress on structural reforms could lead the Fund to merge the fifth and sixth reviews. This move threatens to delay the disbursement of a new loan installment for up to six full months.
Three sources informed Al-Masry Al-Youm that an IMF mission arrived in Cairo last May to begin the fifth review of the 46-month, eight billion dollar financing program.
However, there has been no announcement yet of positive results or a timeline for the new tranche’s disbursement.
This follows after the approval of the fourth review last March, which allowed Egypt to receive a $1.2 billion installment, bringing the total disbursed amount of the loan to approximately $3.5 billion, according to Reuters estimates.
Sources indicated that the primary reason for the delay in the fifth review is the IMF’s dissatisfaction with the Egyptian government’s performance concerning structural reforms.
Chief among these are the divestment from state-owned assets and the expansion of the tax base, reforms that form the core of the agreement with the Fund.
According to one source, Egypt failed to meet half of the structural benchmarks during the last two reviews, despite relatively acceptable progress in fiscal reforms. As of the time of this report, no comment has been issued by the Ministry of Finance or the Central Bank regarding these developments.
This setback is likely to postpone the program until after the summer, with the earliest IMF Executive Board meeting anticipated in December, according to the same source.
Sources added that the Egyptian government requested the IMF to delay the release of the experts’ report for the fourth review to allow sufficient time to prepare a plan detailing measures for expanding the tax base.
Egypt’s House of Representatives had approved amendments to the Value Added Tax (VAT) law on Sunday, which will result in new increases on construction, contracting, crude oil, cigarettes, and alcoholic beverages.
One source suggested that these amendments might pave the way for the IMF to issue the postponed experts’ report.
The Head of the Parliament’s Planning and Budget Committee, Fakhry al-Fiky,commented on these developments. He stated that communication with the IMF are ongoing, while simultaneously dismissing rumors regarding the merging of the fifth and sixth reviews.
Al-Fiky told Al-Masry Al-Youm that structural reforms linked to the state ownership policy document and the privatization program have indeed been affected by recent regional and global events.
However, he noted that the general budget’s financial indicators show significant improvement, adding that discussions with the Fund regarding quantitative performance criteria are progressing well.
He indicated that the approval of the VAT law amendments came in response to understandings with the IMF, as they had been pending since the fourth review and were implemented within the framework of the fifth review.
Edited translation from Al-Masry Al-Youm
Egypt’s next IMF tranche in doubt amid slow reforms Egypt Independent.
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