Egypt Secures $1.2 Billion IMF Disbursement Amid Economic Reforms
Egypt has obtained a $1.2 billion disbursement from the IMF after its fourth economic reform review, totaling $3.2 billion under the Extended Fund Facility. Alongside this, a $1.3 billion funding for climate reforms has been approved. Economic indicators reveal mixed recovery; GDP growth has rebounded, while inflation is gradually easing. Despite improvements, fiscal challenges remain significant, necessitating reforms and strategic 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 approval, provided by the IMF’s Executive Board under the Extended Fund Facility (EFF), raises Egypt’s total funding under this program to approximately $3.2 billion. Additionally, the IMF has sanctioned a $1.3 billion arrangement through the Resilience and Sustainability Facility to support Egypt’s climate-related reforms.
The 46-month EFF arrangement, initially approved in December 2022, aims to foster macroeconomic stability and facilitate structural reforms for sustainable growth. Despite facing external challenges such as regional conflicts and trade disruptions, the IMF has recognized Egypt’s efforts in stabilizing its economy. Nigel Clarke, the deputy managing director and chair of the IMF executive board, stated, “Since March 2024, the authorities have made considerable progress in stabilizing the economy and rebuilding market confidence despite a challenging external environment.”
Macroeconomic indicators show a mixed recovery in Egypt’s economy. The gross domestic product (GDP) growth rate has slowed to 2.4 percent in the fiscal year 2023-24, compared to 3.8 percent the previous year, but rebounded to 3.5 percent in the first quarter of fiscal year 2024-25. Inflation, which surged in preceding years, has been gradually easing since September 2023, providing some relief to household incomes.
In the fiscal year 2023-24, the government reported a primary fiscal surplus of 2.5 percent of GDP, reflecting a one-percentage-point improvement from the previous year, primarily due to expenditure controls that mitigated weaker domestic revenue performance. Nonetheless, Egypt still grapples with substantial fiscal challenges, including high debt levels and significant financing needs. The current account deficit rose to 5.4 percent of GDP in 2023-24, largely due to a $6 billion decrease in Suez Canal receipts, influenced by trade disruptions in the Red Sea.
On a positive note, remittances from Egyptian workers abroad and robust tourism revenues have provided essential foreign exchange inflows. To ensure fiscal sustainability, the IMF has recommended that Egypt broaden its tax base, streamline tax incentives, and enhance compliance. Clarke emphasized, “Broadening the tax base, streamlining tax incentives, and enhancing compliance are essential to creating fiscal space for priority development and social needs.” Moreover, the IMF highlighted the significance of a comprehensive debt management strategy, which includes deepening the domestic debt market and improving fiscal transparency, particularly regarding off-budget entities.
In light of these external challenges, the Egyptian government has revised its medium-term fiscal targets to better align with economic conditions.
In conclusion, Egypt’s recent $1.2 billion IMF disbursement underscores its commitment to economic reform despite ongoing challenges. The country has achieved a primary fiscal surplus and is witnessing initial signs of economic recovery, including stabilizing inflation and improved GDP growth. However, significant fiscal obstacles persist, necessitating a broadening of the tax base and enhanced compliance to secure the economy’s future stability.
Original Source: www.arabnews.com
