The International Monetary Fund has approved $2.5 billion for Egypt, comprising a $1.2 billion disbursement and $1.3 billion under a resilience arrangement. Key policies have been implemented to maintain macroeconomic stability despite challenges. The fiscal balance has improved even amidst an increased current account deficit and external pressures. The overall outlook shows cautious optimism for Egypt’s economic recovery.
The International Monetary Fund (IMF) has concluded its fourth review of Egypt’s economic reform program, approving a $1.2 billion disbursement. Additionally, the IMF’s executive board granted Egypt’s request for an arrangement under the resilience and sustainability facility, allowing access to approximately $1.3 billion. This brings the total disbursements under the extended fund facility (EFF) to about $3.207 billion, which represents 119 percent of Egypt’s quota. The 46-month EFF arrangement was sanctioned on December 16, 2022.
Egyptian authorities have actively pursued key policies to maintain macroeconomic stability, even amid regional tensions that negatively impacted Suez Canal revenues. Economic growth decelerated to 2.4 percent in FY2023-24, down from the previous fiscal year’s 3.8 percent; however, it rebounded to around 3.5 percent year-on-year in the first quarter of FY2024-25. Inflation has been declining since September 2023, yet the current account deficit widened to 5.4 percent of GDP. Conversely, the primary fiscal balance improved by one percentage point, reaching 2.5 percent of GDP due to stringent expenditure controls.
The IMF recognized the difficult external and domestic conditions and approved the authorities’ request to adjust their medium-term fiscal commitments. The primary balance surplus, excluding divestment proceeds, is projected to attain 4 percent of GDP in FY2025-26, which is half a percent lower than previously committed, with an increase to 5 percent of GDP in FY2026-27 as per earlier agreements.
Challenges continue to loom on the horizon, as the external environment remains fraught with difficulties due to ongoing shocks. The war with Sudan has led to a significant influx of refugees, while trade disruptions in the Red Sea since December 2023 have caused a decrease of $6 billion in foreign exchange inflows from the Suez Canal for 2024. Despite these hardships, remittances from Egyptians abroad and tourism revenues have remained strong.
At the conclusion of discussions, Nigel Clarke, deputy managing director and chair, commended the authorities for achieving substantial progress in stabilizing the economy and restoring market confidence amidst the challenging environment and ongoing external shocks, including regional conflicts and trade disruptions.
In summary, the IMF has endorsed Egypt’s economic reform program, approving a total of $2.5 billion in recent disbursements. While Egypt faces significant challenges due to external pressures, particularly from regional tensions and trade disruptions, the government’s policies have led to some improvements in fiscal stability. The outlook remains cautiously optimistic as authorities continue to navigate these obstacles while striving for growth and macroeconomic stability.
Original Source: economymiddleeast.com
