Ahram Online provides the full details regarding the new financing packages here.
The fund released the review results a few hours after announcing its completion.
This review enables the Egyptian authorities to draw approximately $1.2 billion, increasing Egypt’s total purchases under the EFF to about $3.2 billion out of a total of $8 billion.
The EFF arrangement was initially approved on 16 December 2022. The IMF Executive Board has also approved Egypt’s request for an arrangement under the Resilience and Sustainability Facility (RSF), granting access to about $1.3 billion.
Economic performance amid challenges
The IMF statement said that despite ongoing regional tensions that have led to a sharp decline in Suez Canal receipts, the Egyptian authorities have continued implementing key policies to preserve macroeconomic stability.
Although growth slowed to 2.4 percent in FY2023/2024, which ended at the end of June 2024, from 3.8 percent in FY2022/2023, it rebounded to approximately 3.5 percent year-on-year in the first quarter (Q1) of FY2024/2025.
Inflation has been trending downward since September 2023. However, during FY2023/2024, the account deficit widened to 5.4 percent of GDP, even though the primary fiscal balance improved to a surplus of 2.5 percent of GDP due to tight expenditure controls.
In response to challenging external and domestic economic conditions, the IMF Executive Board approved recalibrating Egypt’s medium-term fiscal commitments.
Thus, Egypt's primary balance surplus is projected to reach four percent of GDP in FY2025/2026, roll out on 1 July, and increase to five percent in FY2026/2027.
Despite this, progress toward fiscal consolidation in the first half (H1) of FY2024/2025 has been slower than initially projected, prompting the authorities to control spending.
External environment and structural reforms
The external environment remains challenging, exacerbated by ongoing regional conflicts and trade disruptions in the Red Sea, which have significantly impacted foreign exchange inflows.
Meanwhile, remittances and tourism receipts have remained robust. The shift to a flexible exchange rate regime in March 2024 has shown positive outcomes, with unifying the foreign exchange (FX) rates and trading activity in the interbank market increasing.
However, the implementation of structural reforms has seen mixed results, with notable delays in critical areas such as the divestment plan.
Moreover, the IMF highlighted that the authorities have taken important steps, including enhancing the operational independence of the Egyptian Competition Authority and engaging an international consulting firm to improve governance practices in public banks.
Climate change and economic resilience
The statement also touched upon the country’s efforts to address climate change through medium-term reforms supported by the RSF arrangement, which aims to accelerate decarbonization and strengthen environmental risk management.
IMF Deputy Managing Director Nigel Clarke underscored the considerable progress made by the authorities in stabilizing the economy despite external shocks. GDP growth is showing signs of recovery, and inflation is moderating.
Outlook and recommendations
Looking ahead, the IMF emphasized the need for continuous vigilance and a strong commitment to fiscal sustainability.
Strengthening domestic revenue mobilization and enhancing transparency in fiscal activities are essential for creating fiscal space for development needs.
Furthermore, transitioning to a new economic model that reduces state involvement and empowers the private sector is critical for sustainable growth.
The IMF Executive Board has recognized the authorities' progress but urged them to intensify their structural reform efforts to foster inclusive and job-led growth.
Implementing macro-critical climate reforms while encouraging private investment will further enhance Egypt's economic resilience.
The completion of the fourth review under the EFF arrangement and the approval of the RSF reflect the IMF's support for Egypt's ongoing economic reform efforts.
The next Article IV consultation with Egypt is anticipated to follow the established consultation cycles for IMF member countries.
Additionally, the IMF expected Egypt’s real GDP growth to recover in FY2024/2025 to 3.6 percent from 2.4 percent in FY2023/2024.
The fund also expected inflation to moderate to 16.6 percent by the end of FY2024/2025, with an average of 22.4 percent till the end of this fiscal year.
In addition, the IMF expected the country’s debt-to-GDP ratio to decline from 90.9 percent in FY2023/2024 to 86.8 percent by the end of FY2024/2025.
Meanwhile, it expected the external debt to jump to 46.1 percent of the GDP in FY2024/2025, up from 39.9 percent posted in FY2023/2024.
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