Our economist discusses the key highlights of the IMF loan’s document (Read full report) and its impact on the EGP, fiscally and on the monetary policy.   The agreement allows the CBE to hold “occasional FX sales…to prevent excessive short-term exchange rate fluctuations”, which means the market is likely to benefit from the build-up of foreign reserves in the near future. Remaining capital controls (limit of individuals’ external transfers and deposit limits on non-essential businesses) will expire by June 2017. The implied USD-EGP exchange rate (see Fig. 12) in the document, is likely calling for an average USD-EGP of EGP13.3 in FY2017/18; this is significantly stronger than current market rates.   Total fiscal consolidation of 5.5% of GDP will be sought at the primary level and 6.2% at the overall balance levels. This will be mostly driven by a 2.5% gain in tax revenues (driven primarily by VAT) as well as a 2.4% reduction in energy subsidies. Wage control and normalising public investment are also key contributors to the consolidation. Interestingly, the IMF expects a sharp decline in interest payments in GDP only in FY2018/19 when it is expected to drop 1.4%. The fund will be also monitoring the wider government sector (mostly economic authorities which are not part of the central government budget) to review contingent liabilities to fiscal balances, requiring a report on issuance and monitoring of state guarantees by 31 January 2017. A capital gains or a stamp duty will be implemented in FY2017/18.   Total fiscal consolidation of 5.5% of GDP will be sought at the primary level and 6.2% at the overall balance levels. This will be mostly driven by a 2.5% gain in tax revenues (driven primarily by VAT) as well as a 2.4% reduction in energy subsidies. Wage control and normalising public investment are also key contributors to the consolidation. Interestingly, the IMF expects a sharp decline in interest payments in GDP only in FY2018/19 when it is expected to drop 1.4%. The fund will be also monitoring the wider government sector (mostly economic authorities which are not part of the central government budget) to review contingent liabilities to fiscal balances, requiring a report on issuance and monitoring of state guarantees by 31 January 2017. A capital gains or a stamp duty will be implemented in FY2017/18.