IMF Chief: Multiple Exchange Rates in Egypt are “Disastrous”

The International Monetary Fund’s (IMF) Director, Kristalina Georgieva, expressed concerns about Egypt’s multiple exchange rate system, according to an interview with Al Arabiya Business on Sunday, 11 February.

At the Arab Fiscal Forum in Dubai, Georgieva criticized Egypt’s use of multiple exchange rates, calling them detrimental and urging the country to adopt a market-based system for determining currency exchange.

Amid external shocks impacting Egypt’s economy, the IMF and Egypt are nearing a loan agreement following productive discussions in Cairo, according to Georgieva. This comes as the Fund undertakes crucial reviews with Egypt and collaborates with other parties to fulfill the country’s growing financial needs.

Inflation reduction is a key priority in its program with Egypt, Georgieva emphasized. The Fund is exploring ways to enhance Egypt’s economic flexibility to achieve this goal.

The IMF recently lowered its Middle East and North Africa (MENA) GDP growth forecast for 2024 to 2.9%, citing short-term oil production cuts and the Gaza conflict. This revision contrasts with an upgraded global growth outlook, driven by faster inflation decline in the US and China.

While oil cuts impacted oil exporters, neighboring economies near Israel and Palestine saw tourism dips, and Red Sea attacks further affected global freight costs.

Egypt’s economy has been navigating turbulence recently, largely due to the devaluation of the Egyptian pound. The pound’s devaluation has made imports more expensive, leading to inflation that currently hovers around 20 percent. This translates to higher prices for essentials like food, fuel, and medicine, squeezing household budgets and eroding purchasing power.

On the 1st of February, the Central Bank of Egypt (CBE) took a decisive step in its fight against inflation, raising interest rates by a significant 2 percent. This marks the first such increase since August 2023.