IMF Concludes Egypt Review and Approves New Funding Plan
The IMF has completed Egypt’s fourth review under the EFF, approving US$1.2 billion in funding. Macroeconomic stability persists, but structural reforms show mixed progress. Key priorities involve revenue enhancement and governance improvements. A new RSF arrangement allocates US$1.3 billion. Challenges remain due to external shocks, yet positive growth signs are noted. Continuous reform implementation is essential for sustained growth.
The International Monetary Fund (IMF) has completed its fourth review of Egypt’s Extended Fund Facility (EFF) arrangement, permitting the country to draw approximately US$1.2 billion. Despite a challenging regional environment, Egypt has maintained macroeconomic stability; however, the implementation of structural reforms has been inconsistent, necessitating more decisive action to ensure strong and sustained growth moving forward. Key areas of focus include enhancing domestic revenue, improving the business climate, accelerating divestment efforts, and increasing governance and transparency.
The IMF has also approved an arrangement under the Resilience and Sustainability Facility (RSF), granting access to about US$1.3 billion. Moreover, the Executive Board concluded the 2025 Article IV Consultation with Egypt. While growth slowed to 2.4 percent in fiscal year 2023/24 from 3.8 percent, it rebounded to around 3.5 percent during the first quarter of fiscal year 2024/25. Inflation has steadily decreased since September 2023, although the current account deficit increased to 5.4 percent of GDP.
The Board authorized a recalibration of Egypt’s medium-term fiscal commitments, projecting a primary balance surplus of 4 percent of GDP for the next fiscal year, with a target of 5 percent for FY 2026/27. Despite achieving a 2.5 percent primary fiscal surplus in FY 2023/24 through stringent expenditure controls, fiscal consolidation showed weaker progress than anticipated. The authorities are focused on curbing spending in the latter half of the fiscal year.
The external environment presents ongoing challenges, including ongoing regional conflicts and disruptions affecting the Suez Canal, significantly impacting trade. Conversely, remittances and tourism have remained strong. Following the shift to a flexible exchange rate regime in March 2024, improvements have been observed, although fluctuations remain moderate. Continuous vigilance is essential to reinforce the perception of a truly flexible exchange rate.
Progress on structural reforms has varied, with notable delays; nonetheless, recent actions involve enhancing the operational independence of the Egyptian Competition Authorities and engaging international consulting for governance studies. The authorities are also advancing macro-critical reforms addressing climate change, with the RSF facilitating efforts toward decarbonization and environmental risk management.
Mr. Nigel Clarke, Deputy Managing Director of the IMF, stated, “Considerable progress has been made in stabilizing the economy… Notably, GDP growth has shown signs of recovery, inflation is gradually moderating, and foreign exchange reserves are at adequate levels.”
The IMF’s Executive Board recognizes the advance in restoring market confidence despite challenges; however, mixed results in the structural reform agenda are noted as potential growth constraining factors. Directors have emphasized the importance of fiscal sustainability, effective revenue mobilization, and necessary structural reforms to mitigate vulnerabilities while achieving Egypt’s developmental goals.
To promote an inclusive growth framework, transitioning to a new economic model with a reduced state presence and enhanced competitive dynamics is critical. Additionally, implementing climate reforms aligned with private investment initiatives aims to strengthen resilience to future economic shocks.
In summary, the IMF’s recent review highlights Egypt’s ongoing progress in stabilizing its economy despite external challenges. The approval of new funding under the EFF and RSF signifies support for critical reforms aimed at enhancing fiscal sustainability and structural transformation. However, the country faces significant medium-term fiscal challenges, necessitating decisive implementation of reforms to secure robust growth and development while managing vulnerabilities. Continuous commitment to these reforms will be essential in navigating the economic landscape and promoting resilience in the face of ongoing global uncertainties.
Original Source: www.miragenews.com
