IMF’s Lagarde calls Egypt currency devaluation a “welcome move”

International Monetary Fund managing director Christine Lagarde has called on Thursday Egypt’s historic currency devaluation a “welcome move” that showed a serious approach by the government to deal with the country’s economic problems.

The Egyptian central bank floated the pound on Thursday, devaluing it by 32.3 percent to an initial guidance level of 13 pounds to the dollar, following weeks of turbulence and mounting pressure to reform the economy.

“This is a welcome move given the economic circumstances,” Lagarde told Reuters on the sidelines of an IMF economic conference in Washington. “The way in which it is handled is welcomed and it’s a decision clearly that the Egyptian authorities have matured and deliberated and are putting in place for the Egyptian economy and for the Egyptian currency.”

The IMF has required gradual steps toward a floating, market-driven foreign exchange rate system as one of the pre-conditions for board approval of a $12 billion IMF loan program for Egypt. Supplemental bilateral financing of up to $6 billion also needs to be in place, and implementation of a government plan to reduce fuel subsidies.

Chris Jarvis, IMF mission chief for Egypt, said in a statement that he anticipates IMF board consideration of the Egyptian loan program within the next few weeks.