Egypt has secured a $1.2 billion disbursement from the IMF following the fourth review of its economic reform program, totaling $3.2 billion. The IMF also approved a $1.3 billion arrangement for climate reforms. While Egypt’s economy shows signs of recovery, it faces fiscal challenges requiring strategic reforms in taxation and debt management.
Egypt has successfully secured a $1.2 billion disbursement from the International Monetary Fund (IMF) following the completion of the fourth review of its economic reform program. This disbursement, sanctioned by the IMF’s Executive Board under the Extended Fund Facility, raises the total funding under the program to approximately $3.2 billion. Furthermore, the IMF has approved a $1.3 billion arrangement under the Resilience and Sustainability Facility, intended to bolster Egypt’s climate-related reforms.
The 46-month Extended Fund Facility arrangement, initially authorized in December 2022, is strategically designed to foster macroeconomic stability and implement structural reforms that support sustainable growth. The IMF recognizes Egypt’s progress in stabilizing its economy in light of external difficulties such as ongoing regional conflicts and trade disruptions.
“Since March 2024, the authorities have made considerable progress in stabilizing the economy and rebuilding market confidence despite a challenging external environment,” Nigel Clarke, deputy managing director and chair of the IMF executive board, remarked. Notably, macroeconomic indicators demonstrate a mixed recovery for Egypt; GDP growth decelerated to 2.4 percent during the fiscal year 2023-24 from 3.8 percent the previous year but rebounded to 3.5 percent in the initial quarter of the fiscal year 2024-25.
Inflation rates, which had surged in preceding years, have been gradually moderating since September 2023, alleviating some strain on household incomes. The government also achieved a primary fiscal surplus of 2.5 percent of GDP for 2023-24, reflecting a one-percentage-point improvement from the earlier year, primarily due to enhanced expenditure controls offsetting weaker domestic revenue performance.
Despite these advancements, Egypt faces ongoing fiscal challenges, particularly high debt levels and significant financing needs, with the current account deficit widening to 5.4 percent of GDP in 2023-24. This widening is mainly attributed to a $6 billion decline in Suez Canal revenues, influenced by trade disruptions in the Red Sea. Conversely, remittances from Egyptian expatriates and robust tourism revenues have provided essential foreign exchange inflows.
To secure fiscal sustainability, the IMF recommends that Egypt expand its tax base, streamline tax incentives, and enhance compliance. As emphasized by Mr. Clarke, “Broadening the tax base, streamlining tax incentives, and enhancing compliance are essential to creating fiscal space for priority development and social needs.” Additionally, the IMF stresses the importance of a comprehensive debt management strategy, advocating for a deeper domestic debt market and enhanced fiscal transparency, especially regarding off-budget entities.
In light of external challenges, the Egyptian government has adjusted its medium-term fiscal targets accordingly.
In summary, Egypt’s recent $1.2 billion disbursement from the IMF marks a significant milestone in its ongoing economic reform efforts, bringing total funding under the program to $3.2 billion. Despite a mixed recovery in macroeconomic indicators and existing fiscal challenges, strategic recommendations from the IMF aim to enhance fiscal sustainability and economic resilience. As the nation adjusts fiscal targets to respond to external pressures, the focus remains on stabilizing the economy and fostering sustainable growth.
Original Source: www.arabnews.com
