Egypt Secures $1.2 Billion Disbursement from IMF as Part of Economic Reform Program
Riyadh: The International Monetary Fund (IMF) has approved a disbursement of $1.2 billion to Egypt, marking the completion of the fourth review of its economic reform program under the Extended Fund Facility (EFF). This latest disbursement brings Egypt’s total funding under the program to approximately $3.2 billion.
Progress in Economic Reform Program
The IMF has acknowledged Egypt’s progress in stabilizing its economy despite external challenges such as regional conflicts and trade disruptions. The 46-month EFF arrangement, initially approved in December 2022, is designed to promote macroeconomic stability and drive structural reforms to support sustainable growth. According to Nigel Clarke, deputy managing director and chair of the IMF executive board, "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 Mixed Recovery
Macroeconomic indicators show a mixed recovery for Egypt. Gross domestic product (GDP) growth, which slowed to 2.4 percent in the fiscal year 2023-24 from 3.8 percent the previous year, rebounded to 3.5 percent in the first quarter of the fiscal year 2024-25. Inflation, which had surged in recent years, has been gradually moderating since September 2023, alleviating some pressure on household incomes.
Fiscal Performance and Challenges
The government achieved a primary fiscal surplus of 2.5 percent of GDP in 2023-24, marking a one-percentage-point improvement from the previous year. This was primarily driven by expenditure controls, which helped offset weaker domestic revenue performance. However, Egypt continues to face significant fiscal challenges, including high debt levels and substantial financing needs. The country’s current account deficit widened to 5.4 percent of GDP in 2023-24, largely due to a $6 billion drop in Suez Canal receipts in 2024, caused by trade disruptions in the Red Sea.
Recommendations for Fiscal Sustainability
To ensure fiscal sustainability, the IMF has recommended that Egypt expand its tax base, streamline tax incentives, and improve compliance. As Clarke noted, "Broadening the tax base, streamlining tax incentives, and enhancing compliance are essential to creating fiscal space for priority development and social needs." Additionally, the IMF stressed the importance of a comprehensive debt management strategy, which includes deepening the domestic debt market and enhancing fiscal transparency, particularly concerning off-budget entities.
Medium-Term Fiscal Targets
In response to external challenges, the Egyptian government has adjusted its medium-term fiscal targets. The government’s revised projections aim to achieve a primary surplus of 3 percent of GDP by 2027-28, while reducing the current account deficit to 2.5 percent of GDP by 2026-27.
Conclusion
The IMF’s disbursement of $1.2 billion to Egypt marks a significant milestone in the country’s economic reform program under the EFF. While Egypt continues to face fiscal challenges, the progress made in stabilizing its economy and rebuilding market confidence is notable. The IMF’s recommendations for expanding the tax base, streamlining tax incentives, and improving compliance are crucial steps towards ensuring fiscal sustainability in Egypt.