Egypt has secured an additional $2.5 billion from the IMF following a successful economic reform review. The IMF has acknowledged the progress made while highlighting issues such as declining growth and structural reform challenges. Measures to enhance fiscal sustainability and an emphasis on climate reform are vital for future resilience. Immediate access to $1.2 billion increases total loan disbursements to $3.207 billion.
Egypt has successfully unlocked an additional loan of $2.5 billion from the International Monetary Fund (IMF) following the completion of the fourth review of its economic reform program. The IMF confirmed that the extended fund facility arrangement, approved on December 16, 2022, has enabled immediate access to approximately $1.2 billion for Egypt, raising total disbursements under the program to about $3.207 billion, representing 119 percent of its quota.
In tandem with the loan, the IMF sanctioned the authorities’ request for an arrangement under the Resilience and Sustainability Facility (RSF), granting access to approximately $1.3 billion. The completion of the 2025 Article IV consultation highlighted ongoing policy implementations aimed at preserving macroeconomic stability amidst regional tensions affecting the Suez Canal revenue. While growth fell to 2.4 percent in FY2023/24 from 3.8 percent the previous year, signs of recovery emerged, with growth rebounding to around 3.5 percent year-on-year in the first quarter of the current fiscal year.
Since September 2023, headline inflation in Egypt has been on a downward trajectory. However, the current account deficit widened to 5.4 percent of GDP, despite improvements in the primary fiscal balance due to strict expenditure controls. The IMF has acknowledged the prevailing external and domestic economic challenges, prompting the recalibration of the authorities’ medium-term fiscal commitments, leading to a projected primary balance surplus of 4 percent of GDP for FY 2025/26.
The authorities are committed to curbing spending to meet fiscal targets for FY 2024/25. Amid an externally challenging environment marked by conflicts and trade disruptions, remittances and tourism revenues have remained robust. The transition to a flexible exchange rate regime since March 2024 is yielding positive outcomes, with reduced gaps between exchange rates and increased interbank market trading activity, despite limited exchange rate fluctuations.
The IMF has expressed the need for sustained vigilance to ensure the reform is solidified over time. There have been mixed results in advancing the structural reform agenda, yet critical reforms aimed at enhancing competition and improving financial sector governance are underway. The RSF will support significant reforms related to climate change resilience.
In concluding remarks, Mr. Nigel Clarke, Deputy Managing Director and Chair of the IMF Executive Board, recognized significant economic stabilization efforts by the authorities, acknowledging that GDP growth is recovering while inflation is moderating. Nonetheless, significant challenges—including high debt and structural reform progress—remain, necessitating measures to enhance fiscal sustainability and market competitiveness to foster a robust and inclusive economy.
In summary, Egypt’s unlocking of $2.5 billion in IMF loans is a pivotal moment in its economic reform journey, reflecting progress in stabilizing its economy amidst external challenges. Despite signs of recovery in growth and reductions in inflation, significant fiscal and structural challenges persist. The authorities must successfully navigate these obstacles to achieve comprehensive economic resilience and sustainability moving forward.
Original Source: dmarketforces.com
