IMF Approves $2.5 Billion for Egypt Following Economic Reform Review

The IMF has approved $2.5 billion for Egypt following the fourth review of its economic reform program. This includes $1.2 billion in disbursements and $1.3 billion from the Resilience and Sustainability Facility. Despite challenges, Egyptian authorities are making progress toward economic stability, with improved fiscal balances and a recovery in growth rates noted for FY2024-25.

The International Monetary Fund (IMF) has approved a total of $2.5 billion for Egypt, following the completion of the fourth review of Egypt’s economic reform program. This includes a disbursement of $1.2 billion, along with access to approximately $1.3 billion through an arrangement under the Resilience and Sustainability Facility, as stated by the IMF. Consequently, Egypt’s total purchases under the Extended Fund Facility (EFF) have reached about $3.207 billion, which equates to 119 percent of its quota. The 46-month EFF arrangement was initially approved on December 16, 2022.

Despite facing regional tensions that have adversely affected Suez Canal revenues, the Egyptian authorities have made steady progress in implementing crucial policies to maintain macroeconomic stability. Economic growth slowed to 2.4 percent in FY2023-24—down from 3.8 percent in the preceding year—but showed signs of recovery, achieving approximately 3.5 percent growth year-on-year in the first quarter of FY2024-25. Inflation, which has been declining since September 2023, features as a critical concern, while the current account deficit has expanded to 5.4 percent of GDP. However, the primary fiscal balance has improved, increasing by 1 percentage point to 2.5 percent of GDP due to stringent expenditure controls compensating for weaker domestic revenue performance.

The IMF has noted that, while external challenges persist, there is an expectation for recalibrated medium-term fiscal commitments by the Egyptian authorities. The organization indicated that the primary balance surplus may reach 4 percent of GDP in FY2025-26, slightly lower than previous commitments, before increasing to 5 percent of GDP in FY2026-27. The IMF emphasized that this adjustment is in response to ongoing difficult external conditions affecting the Egyptian economy.

The ongoing external environment remains challenging, exacerbated by persistent shocks such as the conflict in Sudan, which has led to a significant influx of refugees, alongside trade disruptions in the Red Sea that resulted in a $6 billion reduction in foreign exchange inflows from the Suez Canal for 2024. Nonetheless, remittances from Egyptians abroad and tourism revenues have shown considerable resilience. At the conclusion of its discussions, Nigel Clarke, Deputy Managing Director and Chair, acknowledged the notable progress made by Egyptian authorities since March 2024 in stabilizing the economy despite these external impediments.

In summary, the IMF’s approval of $2.5 billion for Egypt is indicative of the progress made under its economic reform program. Although the country faces significant external challenges and slower growth rates, stringent fiscal measures are facilitating an improvement in key economic indicators. Continued focus on macroeconomic stability and adaptive fiscal policies is essential for Egypt’s recovery amidst external shocks.

Original Source: economymiddleeast.com