Egypt Asserts New IMF Program Won't Entail New Burdens on Citizens

General view of an Egyptian local market - AP
General view of an Egyptian local market - AP
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Egypt Asserts New IMF Program Won't Entail New Burdens on Citizens

General view of an Egyptian local market - AP
General view of an Egyptian local market - AP

Egypt's Finance Minister Mohamed Maait said that the new program with the International Monetary Fund (IMF) aims to maintain the economic reform program and ensure the sustainability of growth rates, asserting that it won't entail any additional burdens on citizens.

Egypt kicked off talks with IMF officials to consult on a new program to maintain the stability of economic and financial conditions and enhance comprehensive structural reforms.

The program also aims to enhance the ability of the Egyptian economy to withstand external shocks and the possible repercussions of the conflict in Ukraine which will result in doubling global pressures on countries' economies and disrupt supply chains.

The minister said in a press statement that the program seeks to maintain a declining path of the deficit and GDP debt rates by moving forward with greater opportunities for the private sector in the development process, leading to enhancing its contributions to economic activity.

Maait pointed out that the successive certificates of confidence that the national economy has received from international financing and rating institutions confirm that Egypt is on the right path.

The government is closely following the repercussions of the Russian-Ukrainian crisis on global prices and supply chains, which coincide with a significant and accelerating rise in interest rates globally, said Maait.

He added that the global economic environment is witnessing successive changes that impact the economies of various countries, especially emerging ones, and in light of this, the Egyptian government is keen to take all necessary measures and policies to ensure macroeconomic stability.

The Ukrainian war impacted Egypt's economy, and Cairo is one of the largest importers of grain globally, which put pressure on the local currency, coinciding with the massive withdrawal of the dollar from the country after the Federal Reserve raised interest rates.

The Central Bank raised its key interest rate for the first time since 2017, citing inflationary pressures triggered by the coronavirus pandemic and Russia's war in Ukraine, which hiked oil prices to record highs.

Head of HC Securities and Bonds Hussein Choucri said the recent decisions of the Central Bank of Egypt had a good resonance with the business community in Egypt and international institutions and significant foreign investors in the stock market and debt instruments.

He explained in a press statement that these decisions positively impact the market, encourage exports, and help rationalize imports.

Choucri believes the adoption of these decisions was inevitable in light of the changes taking place at a global level due to the Russian-Ukrainian war.

He referred to the new measures announced by the government to rationalize expenditures, noting that following a rational fiscal policy indicates that no new projects to preserve foreign exchange reserves and increase foreign debt should be implied, even if it led to a drop in the rate of expected growth in GDP.

Choucri expects foreign investors to start entering into stocks and debt instruments as soon as they believe the Egyptian Pound will stabilize at this level.

The expert indicated that the Egyptian Pound stands at 18.5 to the dollar and is not expected to fall below this level.



After Trump’s Victory, Arab Demands for Competitive Advantages Due to Regional Tensions

Donald Trump addresses his supporters at the West Palm Beach Convention Center in Florida on Wednesday. (EPA)
Donald Trump addresses his supporters at the West Palm Beach Convention Center in Florida on Wednesday. (EPA)
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After Trump’s Victory, Arab Demands for Competitive Advantages Due to Regional Tensions

Donald Trump addresses his supporters at the West Palm Beach Convention Center in Florida on Wednesday. (EPA)
Donald Trump addresses his supporters at the West Palm Beach Convention Center in Florida on Wednesday. (EPA)

With the election of Donald Trump as US president, the global economy has gained direction for the coming years. Trump’s policies favor corporate tax cuts, increased investment, and expansionary monetary policies. He also promotes local production to boost job creation, which involves imposing significant tariffs on trade partners, particularly in Asia. This approach could trigger a trade war, affecting inflation in both the US and worldwide.

The US economy is already grappling with high prices, slower economic growth, and rising unemployment, alongside a national debt nearing 99% of GDP. This backdrop underscores the importance of economic issues in the recent election.

For the new US administration, domestic concerns will not be the sole priority. Ongoing geopolitical tensions, especially recent Middle Eastern conflicts, will also impact the US economy. To gain regional insights, Asharq Al-Awsat consulted economists from various Arab nations on their expectations and requests from the US president regarding the Middle East.

Priority of Regional Stability

Dr. Mohamed Youssef, an Egyptian economist, emphasized that regional stability is crucial, benefiting the economy and paving the way for resolving complex issues like the Nile Dam dispute affecting Egypt. He highlighted the American role in fostering calm in the region.

Iraqi economist Durgham Mohamed Ali noted that US relations vary across the Middle East; while Lebanon and Yemen remain outside current US alliances, Sudan and Somalia require international aid to rebuild infrastructure.

Competitive Advantage for Arab Countries

Ahmed Moaty, a global markets expert from Egypt, suggested that reduced US tariffs would improve Arab economies’ competitiveness. However, he pointed out the American high debt could motivate the administration to impose tariffs to protect local industries and reduce imports. Ali observed that US tariffs are interest-driven and selective, favoring allies like Japan, Taiwan, and South Korea while being stringent toward BRICS members, such as China, Brazil, and South Africa. He linked tariff policies to regional geopolitics, especially the conflicts involving Israel, Lebanon, Palestine, and Iran, which could influence US economic decisions.

Dr. Mohamed Youssef also argued that easing US-China competition could benefit the global economy, as high tariffs on Chinese goods reduce China’s growth, decreasing demand for key commodities like oil.

Ibrahim Al-Nwaibet, CEO of Saudi Arabia’s Value Capital, predicted that a Republican win could positively impact oil and interest rates, revitalizing the petrochemical and trade finance sectors.

On currency, Moaty noted the strong US dollar pressures emerging markets, especially in the Middle East. He suggested offering US Treasury bonds with higher yields to Arab countries as a counterbalance. Ali added that the dollar’s strength poses challenges for countries heavily reliant on US currency amid global liquidity shortages.

The BRICS Bloc

Ali also mentioned the high levels of US debt, explaining: “In general, the entire world is concerned about rising US debt, slowing growth rates... and is wary of the BRICS alliance, which some Arab countries hope to join. The question remains whether a cold economic war will ensue.”

Youssef also discussed the BRICS, which could play a role in attracting the new US president’s attention to countries joining the alliance. He added: “This may provide new competitive advantages for countries in the region, particularly as countries like Egypt, the UAE, and Iran recently joined BRICS, while Saudi Arabia is still evaluating the benefits of such move.”