The IMF Executive Board has approved the fourth review of Egypt’s EFF arrangement, enabling a withdrawal of US$1.2 billion while recognizing mixed progress in structural reforms. Egypt’s macroeconomic stability remains pivotal, with critical steps needed to enhance revenue, improve the business landscape, and implement climate-focused reforms. Future risks from external conflicts necessitate careful management of reforms to achieve sustained economic growth.
The International Monetary Fund (IMF) Executive Board has finalized the fourth review of Egypt’s Extended Fund Facility (EFF) arrangement, allowing Egypt to withdraw approximately US$1.2 billion. This support aims to maintain macroeconomic stability in a challenging regional context, though progress on structural reforms within the country has shown mixed results. Critical reform implementation is essential for ensuring sustainable economic growth moving forward, notably through enhancing domestic revenues and improving the business environment.
Along with the EFF arrangement, the IMF also approved Egypt’s request for funding under the Resilience and Sustainability Facility (RSF), amounting to around US$1.3 billion. The completion of the 2025 Article IV Consultation reinforces the IMF’s ongoing relationship with Egypt’s economic reform initiatives. Despite external pressures, including a significant decrease in Suez Canal revenues, the Egyptian authorities have upheld key policies to ensure macroeconomic stability while witnessing growth recovery in recent quarters.
Egypt’s growth slowed in fiscal year 2023/24 to 2.4 percent from the previous year’s 3.8 percent; however, a rebound to approximately 3.5 percent growth was noted in the first quarter of fiscal year 2024/25. Inflation rates have declined since September 2023, but the current account deficit increased to 5.4 percent of GDP, necessitating tighter fiscal controls that have thus far yielded a positive primary fiscal balance of 2.5 percent of GDP.
The external economic environment remains difficult, characterized by ongoing regional conflicts and trade disruptions, notably affecting Suez Canal revenue. Nevertheless, robust remittances and tourism receipts have provided support. The adoption of a flexible exchange rate policy has yielded positive results, contributing to the elimination of import demand backlogs while maintaining a stable foreign exchange market.
Mixed results have been noted regarding Egypt’s structural reform agenda, with significant delays in divestment initiatives. Nonetheless, recent efforts to enhance competition via the operational independence of the Egyptian Competition Authorities (ECA) and governance reforms in public banks signify progress toward improving market efficiency. Efforts to address climate change through RSF-supported reforms are also underway, focusing on decarbonization and environmental risk management.
In addressing future challenges, Mr. Nigel Clarke, Deputy Managing Director, emphasized the need for strong fiscal policies and increased transparency in government finances. He underscored the necessity for Egypt to shift towards a new economic model, fostering private sector growth through regulatory reforms, particularly in governance and energy pricing.
Despite advancements, risks persist, particularly due to external shocks and internal policies that may challenge growth. Regional conflicts could further impact fiscal revenues, necessitating careful management of reforms that carry social implications. The IMF Executive Board acknowledged Egypt’s progress while stressing the importance of sustaining reform efforts for long-term economic stability and growth.
In conclusion, the IMF’s approval of additional funding for Egypt underscores the country’s commitment to economic reform amidst a challenging environment. While macroeconomic stability has been preserved, further decisive action on structural reforms and fiscal policies is essential to drive sustainable growth. Continued vigilance against external shocks and the strategic implementation of reforms will be crucial in strengthening Egypt’s economic resilience and achieving long-term objectives.
Original Source: www.miragenews.com
