Egypt’s case to the IMF

Doaa A. Moneim, Monday 29 Apr 2024

Doaa A. Moneim reports on the messages delivered by the Egyptian delegation to the IMF and World Bank Spring Meetings in Washington

Egypt s case to the IMF


Coming almost a month after Egypt agreed on its largest foreign direct investment (FDI) deal and received multi-billion-dollar pledges from international partners, the Spring Meetings of the International Monetary Fund (IMF) and World Bank in Washington last week were a good opportunity to represent the country’s plan to make the best use of the inflows to shore up its economy.

During the meetings, Egypt reiterated its commitments to the IMF under its Extended Fund Facility (EFF) programme, which supports Egypt’s second wave of economic and structural reforms extending through 2026.

The Egyptian delegation included Minister of Finance Mohamed Maait, Minister of International Cooperation Rania Al-Mashat, Governor of the Central Bank of Egypt (CBE) Hassan Abdallah, and Minister of Planning and Economic Development Hala Al-Said.

Egypt’s commitments under the programme focus on four key objectives: shifting to a flexible exchange-rate system; tightening monetary and fiscal policy by containing off-budget capital expenditure; expanding social-protection programmes; and allowing a greater role for the private sector in driving the country’s economic growth.

During a meeting with the IMF’s Mission Chief to Egypt Ivana Hollar, Maait affirmed that Egypt’s economic situation has begun to improve following the implementation of a reform package.

Over the past nine months, positive indicators have been recorded, including a primary surplus of LE416 billion (equivalent to three per cent of GDP), compared to LE50 billion (0.5 per cent of GDP) in the same period of the previous fiscal year.

This represents more than an eightfold annual growth rate, the minister told Hollar.

Additionally, tax revenues have grown by over 41 per cent to post LE1 trillion due to automation efforts as well as expanding the tax base and without imposing new taxes on citizens or investors.

Maait stressed that structural reforms intended to expand the role of the private sector in the economy are ongoing, and Minister of Planning Al-Said noted that Egypt targets raising the private sector’s participation in the country’s economic activity to 48 per cent in the upcoming 2024-25 fiscal year, which starts on 1 July, up from the current 30 per cent.

The expansion of social protection to support both middle and low-income families ranks high on the government’s priorities list, according to Maait, who noted that in the past nine months spending on social benefits has increased by 33.9 per cent.

Additional increases in social-support allocations are planned in the new budget for the upcoming fiscal year, he added.

Meeting with Jihad Azour, director of the Middle East and Central Asia Department at the IMF, Maait reiterated Egypt’s commitment to implement an integrated strategy to manage the country’s overall debt and bring it down to below 80 per cent of GDP by 2027.

The IMF’s World Economic Outlook and the Regional Economic Outlook reports expect Egypt’s public debt to remain above 90 per cent of GDP in 2024 due to the depreciation of the local currency, before declining to below 83 per cent in 2025.

As for the maturity of the debt, Maait said the government aims to extend the average maturity from 3.2 years in June 2023 to 4.5 or five years by June 2028, to alleviate the burden and cost of debt-servicing.

The government also seeks to diversify its sources and instruments of financing, relying more on green bonds, sukuk (Islamic bonds), and low-cost unconventional instruments such as Samurai and Panda bonds.

Maait noted that Egypt does not intend to tap the international financial markets until the end of the current 2023-2024 fiscal year at the end of June.

“The recent and expected cash flows, along with the IMF-supported economic reform programme, will help alleviate financing pressures and reduce the need for rapid financing,” Maait said.

He explained that the Ras Al-Hekma investment deal reflects the ability of the Egyptian economy to attract more investment inflows. In addition, half of the revenues from the privatisation programme will be directed towards directly reducing government debt.

In February, Egypt signed a deal with the UAE’s ADQ to develop the coastal Ras Al-Hekma area with total investments of $35 billion, LE11 billion of which are UAE deposits at the CBE that will be dedicated to investments in the project.

Egypt is expected to attract more than $150 billion in investments based on this deal.

Al-Mashat attended the launch of the Global Collaborative Co-Financing Platform while in Washington, initiated by 10 multilateral development banks to direct additional capital to expand the scope and impact of development around the world.

The platform includes a digital co-financing portal to create a secure platform for registered co-financing entities to identify projects ready for financing. This mechanism, hosted by the World Bank, will increase efficiency and transparency and make it easier for multilateral development banks to exchange information and identify co-financing opportunities.

Al-Mashat stressed the importance of joint financing between development partners to help implement large projects that require large amounts of financing, as well as mobilising funds for developing and emerging countries.

She indicated that Egypt has worked through the framework of international cooperation and development financing to involve development partners in many projects despite the different governance frameworks and standards for each development partner. Among those projects is Egypt’s comprehensive health insurance.

Following a meeting with the Egyptian delegation, Managing Director of the IMF Kristalina Georgieva said that “as Egypt advances its reform agenda, we remain steadfast in our commitment to supporting Egypt in pursuing its economic policies.”

The IMF’s World Economic Outlook report puts Egypt’s GDP growth in 2024 at three per cent, 0.8 per cent less than compared to the estimation of 2023, before rebounding to 4.4 per cent in 2025.

The IMF also projects Egypt’s inflation to reach a peak of 32.5 per cent in 2024 before shrinking to 25.7 per cent in 2025.

* A version of this article appears in print in the 25 April, 2024 edition of Al-Ahram Weekly

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