In January 2017, the International Monetary Fund (IMF) released the full text of its agreement with Egypt, signed months earlier in August, amid widespread public and media indifference. Egypt’s state-run Al-Ahram newspaper offered only a brief mention, international press coverage was minimal, and Gulf media published just a few passing articles. However, the document titled “Memorandum of Economic and Financial Policies” revealed significant details: a $12 billion loan to be disbursed over three years in six installments, contingent on Egypt implementing deep structural reforms in exchange rates, monetary and fiscal policy, social spending, and business regulations. The IMF retains the right to withhold future tranches if Egypt fails to meet benchmarks, as previously seen with Ukraine in 2016.
Egypt’s leadership, under President Abdel Fattah el-Sisi, has adopted a firm economic stance mirroring its political crackdowns. Unlike Hosni Mubarak’s half-measures and containment strategies, the current administration aims to assert control decisively. As Sisi stated during a meeting with editors-in-chief of major state newspapers: “We are correcting the course of Egypt’s economy by taking actions that lay a solid foundation for the state we envision in the coming years.” He warned that delaying reforms would have led to a far more severe crisis.
A pivotal move was the currency liberalization on November 3, 2016, which effectively doubled the value of the U.S. dollar overnight—from 8.8 to 18 Egyptian pounds. Chris Jarvis, the British economist leading the IMF mission to Egypt, acknowledged the devaluation exceeded expectations, though he expressed it cautiously. This decision aimed to stabilize foreign exchange markets and replenish central bank reserves, supported by anticipated funding not only from the IMF but also the World Bank and other multilateral institutions.
Despite this financial lifeline, notable absences in direct support included the United States and most Gulf monarchies—except the United Arab Emirates—highlighting regional hesitancy. European capitals, however, stepped in. The success of future loan disbursements hinges on Egypt’s adherence to reform commitments, including fiscal discipline and subsidy adjustments, all while navigating regional security challenges.
The burden of adjustment has fallen heavily on ordinary Egyptians. Inflation surged, with living costs rising nearly 30% by December 2016. IMF experts did not anticipate inflation easing before the second half of the year. While the government increased cash transfers to officially registered low-income and disabled citizens, over 20 million people—about 35% of the population, according to economist Hoda Al-Geziry—faced soaring prices without meaningful support. Only a small segment of income taxpayers received symbolic relief.
Unexpectedly, even the pharmaceutical sector saw price hikes. Despite existing price controls, the health minister authorized an average 50% increase in drug prices, yielding to pharmacists’ strike threats and pharmaceutical companies’ warnings of production halts. This move undermined public trust in essential service stability and highlighted the tension between economic liberalization and social protection.
— news from Egypt Embraces Economic Uncertainty with IMF Deal and Currency Liberalization
— News Original —
Egypt Tosses Itself into the Unknown
In January 2017, the International Monetary Fund published the full text of its agreement with Egypt, reached the previous August, amid general apathy. State-owned Al-Ahram newspaper barely mentioned the deal, international press largely ignored it, and Gulf media published only a few negligible articles. Yet the documents detailing the “Memorandum of Economic and Financial Policies” reveal the agreement’s depth: a $12 billion IMF loan over three years in six installments, conditional on Egypt enacting profound reforms in exchange rates, monetary and fiscal policies, social spending, and business environment. The IMF can halt disbursements if Egypt fails to meet conditions, as occurred with Ukraine in 2016.
Egypt’s military regime appears determined to apply the same rigor in economic policy as it has in eliminating the Muslim Brotherhood from political life. While Hosni Mubarak favored half-measures and containment, the current president seeks to impose his will. “We are correcting Egypt’s economic path by taking actions that lay a real foundation for the state we want in the coming years,” said Abdel Fattah el-Sisi in a meeting with editors-in-chief of three national newspapers, adding, “Had we continued as before for another year or two, the situation would have become more severe.”
Currency Collapse
The decision to liberalize the exchange rate on November 3 led to a 100% drop in the pound’s value, with the dollar jumping overnight from 8.8 to 18 Egyptian pounds. “The pound depreciated slightly more than expected after the float,” said British economist Chris Jarvis, head of the IMF mission to Egypt, in characteristically guarded terms. He previously drafted speeches for Dominique Strauss-Kahn when the latter led the IMF.
Pending corrective measures, the central bank expects to receive $12 billion in 2017 from the IMF, World Bank, and other multilateral institutions. Notably, the United States and most Gulf monarchies (except the UAE) did not contribute, unlike major European capitals. While foreign reserves may revive the new foreign exchange market and shield the pound, future disbursements depend on Egypt fulfilling IMF conditions, not to mention regional security dynamics.
Egyptian consumers bore the full brunt of the national currency’s collapse. By December 2016, living costs had risen nearly 30%, and IMF experts did not expect inflation to ease before mid-year. Despite increased state aid to officially registered poor and disabled citizens, over 20 million Egyptians—35% of the population, according to Hoda Al-Geziry—faced price surges alone, with only token relief for a small income-tax-paying segment. Drug prices, previously controlled, rose 50% on average after the health minister yielded to pharmacists’ strike threats and pharmaceutical firms’ warnings of halted production.