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
TT

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.



Euro Zone Poised to Enter Trade Quagmire as Trump Wins

A container ship unloads its cargo in the German port of Hamburg (Reuters)
A container ship unloads its cargo in the German port of Hamburg (Reuters)
TT

Euro Zone Poised to Enter Trade Quagmire as Trump Wins

A container ship unloads its cargo in the German port of Hamburg (Reuters)
A container ship unloads its cargo in the German port of Hamburg (Reuters)

As Trump 2.0 becomes a reality, Europe is poised to enter a new geopolitical and trade quagmire with its biggest trading partner.

Donald Trump's victory may harm Europe's economy as proposed 10% US tariffs risk hitting European exports such as cars and chemicals, eroding Europe's GDP by up to 1.5% or about €260 billion.

Analysts warn of European Central Bank (ECB) rate cuts, euro weakness, and a recession risk.

According to several economic analyses, there is broad agreement that Trump's proposed 10% universal tariff on all US imports may significantly disrupt European growth, intensify monetary policy divergence, and strain key trade-dependent sectors such as autos and chemicals.

The long-term effects on Europe's economic resilience could prove even more significant if tariffs lead to protracted trade conflicts, prompting the European Central Bank (ECB) to respond with aggressive rate cuts to cushion the impact, according to Euronews.

Trump's proposed across-the-board tariff on imports, including those from Europe, could profoundly impact sectors such as cars and chemicals, which rely heavily on US exports.

Data from the European Commission shows that the European Union exported €502.3 billion in goods to the US in 2023, making up a fifth of all non-European Union exports.

European exports to the US are led by machinery and vehicles (€207.6 billion), chemicals (€137.4 billion), and other manufactured goods (€103.7 billion), which together comprise nearly 90% of the bloc's transatlantic exports.

ABN Amro analysts, including head of macro research Bill Diviney, warn that tariffs “would cause a collapse in exports to the US,” with trade-oriented economies such as Germany and the Netherlands likely to be hardest hit.

According to the Dutch bank, Trump's tariffs would shave approximately 1.5 percentage points off European growth, translating to a potential €260 bn economic loss based on Europe's estimated 2024 GDP of €17.4 tn.

Should Europe's growth falter under Trump's tariffs, the European Central Bank (ECB) may be compelled to respond aggressively, slashing rates to near zero by 2025.

In contrast, the US Federal Reserve may continue raising rates, leading to “one of the biggest and most sustained monetary policy divergences” between the ECB and the Fed since the euro's inception in 1999.

Dirk Schumacher, head of European macro research at Natixis Corporate & Investment Banking Germany, suggests that a 10% tariff increase could reduce GDP by approximately 0.5% in Germany, 0.3% in France, 0.4% in Italy, and 0.2% in Spain.

Schumacher warns that “the euro area could slide into recession in response to higher tariffs.”

According to Goldman Sachs' economists James Moberly and Sven Jari Stehn, the broad tariff would likely erode eurozone GDP by approximately 1%.

Goldman Sachs analysts project that a 1% GDP loss translates into a hit to earnings per share (EPS) for European firms by 6-7 percentage points, which would be sufficient to erase expected EPS growth for 2025.