Egypt Secures $1.2 Billion IMF Disbursement Amid Economic Reforms

Egypt has secured a $1.2 billion disbursement from the IMF following its fourth economic reform review. This brings total funding under the program to approximately $3.2 billion. The IMF praised Egypt’s progress in stabilizing its economy despite external challenges. The article highlights fiscal improvements and ongoing challenges, including a widening current account deficit and the need for comprehensive tax reforms.

Egypt has successfully secured a $1.2 billion disbursement from the International Monetary Fund (IMF), a crucial milestone achieved after completing the fourth review of its economic reform program. This approval, granted by the IMF’s Executive Board under the Extended Fund Facility (EFF), increases Egypt’s total funding under this program to approximately $3.2 billion. Moreover, a $1.3 billion arrangement has also been authorized to support Egypt’s climate-related reforms.

The arrangement spans 46 months and was initially sanctioned in December 2022, focusing on enhancing macroeconomic stability and driving structural reforms for sustainable growth. The IMF has recognized the progress made by Egypt in stabilizing its economy despite facing external adversities, such as regional conflicts and trade disruptions.

Nigel Clarke, deputy managing director and chair of the IMF executive board, remarked, “Since March 2024, the authorities have made considerable progress in stabilizing the economy and rebuilding market confidence despite a challenging external environment.”

In terms of macroeconomic indicators, Egypt exhibits a mixed recovery. The gross domestic product (GDP) growth slowed to 2.4 percent during the fiscal year 2023-24, down from 3.8 percent the prior year, but saw a rebound to 3.5 percent in the first quarter of the fiscal year 2024-25. Inflation, which had surged recently, has been gradually decreasing since September 2023.

In fiscal measures, the government managed to achieve a primary fiscal surplus of 2.5 percent of GDP for 2023-24, improving by one percentage point from the preceding year, largely due to stringent expenditure controls. However, Egypt remains encumbered with substantial fiscal challenges, including high debt levels and significant financing needs, with the current account deficit widening to 5.4 percent of GDP in 2023-24, partly due to a $6 billion decrease in Suez Canal revenues owing to trade disruptions.

Counterbalancing these issues, remittances from Egyptian workers abroad and robust tourism revenues have helped bolster foreign exchange inflows. To foster fiscal sustainability, the IMF has recommended expanding Egypt’s tax base, streamlining tax incentives, and enhancing compliance. As Clarke emphasized, “Broadening the tax base, streamlining tax incentives, and enhancing compliance are essential to creating fiscal space for priority development and social needs.”

The IMF has also highlighted the necessity for a comprehensive debt management strategy focusing on developing the domestic debt market and improving fiscal transparency regarding off-budget entities. In response to these external pressures, the Egyptian government has revised its medium-term fiscal targets accordingly.

In summary, Egypt’s recent $1.2 billion disbursement from the IMF signifies a crucial step in its ongoing economic reform efforts. While improvements in fiscal measures and GDP growth indicate progress, significant fiscal challenges remain, necessitating further reforms and strategic adjustments. The emphasis on broadening the tax base and enhancing compliance underlines the need for sustained efforts toward economic stability and growth in Egypt.

Original Source: www.arabnews.com