The International Monetary Fund (IMF) is working with Egypt and Tunisia to establish a new program in both countries to offset the negative growth brought about by the Russia-Ukraine war, IMF Managing Director Kristalina Georgieva told Al Arabiya.
Egypt has historically depended on food imports from Ukraine and Russia, two countries which are in jeopardy amid the ongoing war in Ukraine.
“It is really very unfortunate to see Egypt that has done quite well in terms of reforming the economy to be hit both by the food prices and their dependence on imports from Ukraine and from Russia,” said the director.
Previously, the IMF is said to have supported “better safety nets” and “more targeted social assistance,” while the newer form of assistance will be “data driven” from reports formulated by the country’s Ministry of Finance and Central Bank, Georgieva said during the interview which was held on the sidelines of the World Government Summit in the UAE.
Georgieva also credited the Egyptian authorities for quickly identifying the problem of outflow pressures on the system and letting “the exchange rate guide the market,” but declined to elaborate on the specifics of the program.
Concerns about an imminent hike in US interest rates, and the Russian invasion of Ukraine, caused investors to pull billions of dollars out of Egyptian treasuries, bankers and economists recently told Reuters.
The central bank began reducing the size of the open market operations in recent weeks, a move that has poured around 250 billion pounds into the economy since March 1, according to central bank data.
But this has come at a steep price, Reuters reported. The 18 percent yield on the CDs compares to an average yield of 13.395 percent on one-year T-bills sold to banks at an auction on Thursday, according to central bank data.
Saudi Arabia, on March 30, deposited $5 billion in Egypt’s central bank as the Egyptian economy faces new economic pressures as a result of the war in Ukraine.
On March 21, Egypt devalued its currency by around 14 percent after investors had pulled billions of dollars out of Egyptian treasury markets.
IMF Tunisia outlook
An IMF program similar to the one pursued for Egypt is in the works in Tunisia, Georgieva said.
“We got the A-Team in Tunisia. Tunisia came up with a homegrown program. They have defined where they want to take the country too,” she said.
The team is reportedly working on “understanding” the initiative and aligning it with IMF’s guidelines for offering support.
“Very constructive engagement, no final outcome yet” is how the official described the latest progress.
“It is truly heartbreaking to see so many countries being hit once and then hit again. And Tunisia, of course, is among them,” Georgieva said.