An International Monetary Fund team will start on Sunday its first review of Egypt’s $12 billion loan accord, with the debate on how best to curb inflation likely to take centre stage.
The IMF delegation will hold talks with Finance Ministry and central bank officials during the visit, which is scheduled to end on May 11. The talks were preceded by remarks from top IMF officials emphasising the need for policy makers to make tackling inflation a priority. Jihad Azour, the IMF Middle East chief, highlighted interest rates as the “right instrument” to tame inflation, though he later listed them as one option among a set of tools.
Azour’s remarks have fueled speculation that the IMF is recommending that Egypt raise interest rates again after inflation accelerated to more than 30 percent following the central bank’s decision to float the currency in November. The comments came at a time when economists point to a slowing pace of price increases as a sign that inflation may be peaking. Capital Economics said April 10 that “the central bank is unlikely to tighten monetary policy further.”
The central bank’s decision to abandon currency controls on Nov. 3 helped clinch the IMF loan agreement, which officials say is key to restoring investor confidence in the economy. On the same day, the central bank raised interest rates by 300 basis points to 14.75 percent. The Monetary Policy Committee is scheduled to meet next on May 18.
Egyptian Finance Minister Amr El-Garhy told Bloomberg News on Saturday he expects the Washington-based lender to release the second installment of the loan by June.