IMF Approves $2.5 Billion for Egypt Amid Economic Reforms and Challenges
The IMF has unlocked $2.5 billion for Egypt following a fourth review of its economic reform program, which includes a $1.2 billion disbursement and approximately $1.3 billion under the resilience and sustainability facility. Despite external challenges, Egypt is implementing effective policies. The current account deficit has widened, but the primary fiscal balance has shown improvement. Growth has seen a slight rebound, while resiliency in remittances and tourism persists.
The International Monetary Fund (IMF) has completed its fourth review of Egypt’s economic reform program, leading to the approval of a $1.2 billion disbursement. Furthermore, the IMF’s executive board has also sanctioned Egypt’s request for an arrangement under the resilience and sustainability facility, granting access to approximately $1.3 billion. This recent disbursement brings the total funding under the extended fund facility (EFF) to about $3.207 billion, representing 119 percent of Egypt’s quota.
Egypt’s EFF arrangement, which spans 46 months, was initially approved on December 16, 2022. Despite facing regional tensions that significantly impacted Suez Canal revenues, the Egyptian authorities have effectively implemented crucial policies aimed at maintaining macroeconomic stability. Although growth decelerated to 2.4 percent in FY2023-24 from 3.8 percent in the previous year, it rebounded to around 3.5 percent year-on-year in the first quarter of FY2024-25.
Inflation rates have declined since September 2023, while the current account deficit expanded to 5.4 percent of GDP during FY2023-24. In contrast, the primary fiscal balance improved by one percentage point, reaching 2.5 percent of GDP, due to stringent expenditure controls that mitigated domestic revenue shortcomings. The IMF acknowledged the constraints posed by external conditions, approving adjustments to Egypt’s medium-term fiscal commitments, which include a projected primary balance surplus of 4 percent of GDP for FY2025-26.
Despite advancements, challenges continue to loom on the external front. The IMF indicated that ongoing shocks, including the conflict with Sudan, have led to an influx of refugees and trade interruptions in the Red Sea since December 2023. These disruptions resulted in a $6 billion decrease in foreign exchange inflows from the Suez Canal in 2024. Nevertheless, remittances from Egyptian expatriates and tourism revenues have remained strong, showcasing resilience in these sectors.
Nigel Clarke, the IMF’s deputy managing director, remarked on the significant strides made since March 2024, noting that the authorities have made commendable progress in stabilizing the economy and restoring market confidence, despite ongoing external challenges and disruptions.
In conclusion, the IMF’s approval of $2.5 billion for Egypt underscores the nation’s ongoing economic reforms and fiscal management amidst external challenges. The government remains dedicated to stabilizing its economy while adapting to changes in the global market. Policymakers are focused on achieving sustainable growth and maintaining macroeconomic stability despite recent setbacks, demonstrating resilience in the face of rising economic challenges.
Original Source: economymiddleeast.com
