Egypt has received a $1.2 billion disbursement from the IMF, totaling $3.2 billion under its economic reform program. The IMF acknowledges Egypt’s economic stabilization progress despite external challenges. While GDP growth has rebounded to 3.5%, inflation is gradually moderating. The IMF recommends tax and debt management reforms to ensure fiscal sustainability amidst significant fiscal challenges.
Egypt has successfully secured a $1.2 billion disbursement from the International Monetary Fund (IMF) following the conclusion of the fourth review of its economic reform program. This allocation, sanctioned by the IMF’s Executive Board under the Extended Fund Facility (EFF), brings the total funding received by Egypt to approximately $3.2 billion under this initiative. Additionally, a $1.3 billion arrangement through the Resilience and Sustainability Facility has been approved to assist Egypt in its climate-related reforms.
The 46-month EFF arrangement, which received initial approval in December 2022, aims to enhance macroeconomic stability and foster structural reforms for sustainable economic growth. Despite facing external adversities, such as regional conflicts and trade disruptions, the IMF has recognized Egypt’s efforts in stabilizing its economy. “Since March 2024, the authorities have made considerable progress in stabilizing the economy and rebuilding market confidence despite a challenging external environment,” stated Nigel Clarke, deputy managing director and chair of the IMF executive board.
Recent macroeconomic data indicates a mixed recovery for Egypt. The country’s GDP growth experienced a decline, dropping to 2.4 percent in the fiscal year 2023-24 from 3.8 percent in the prior year; however, growth rebounded to 3.5 percent in the first quarter of the fiscal year 2024-25. Concurrently, inflation rates, which had escalated in recent years, have been decreasing gradually since September 2023, providing some relief to household finances.
In fiscal performance, the Egyptian government recorded a primary fiscal surplus of 2.5 percent of GDP in 2023-24, which signifies a one-percentage-point enhancement from the previous year. This improvement is largely attributed to strict expenditure controls implemented to counteract weaker domestic revenue collection. Nevertheless, Egypt continues to confront substantial fiscal challenges, including high debt levels and significant financing demands. The current account deficit increased to 5.4 percent of GDP in 2023-24, primarily caused by a $6 billion decrease in Suez Canal receipts due to trade disruptions in the Red Sea.
Foreign exchange inflows have been bolstered by remittances from Egyptian expatriates and robust tourism revenues. To achieve fiscal sustainability, the IMF has suggested that Egypt widen its tax base, streamline tax incentives, and improve compliance. As noted by Clarke, “Broadening the tax base, streamlining tax incentives, and enhancing compliance are essential to creating fiscal space for priority development and social needs.” Furthermore, the IMF has highlighted the necessity of a comprehensive debt management strategy that includes enhancing fiscal transparency and deepening the domestic debt market.
In light of ongoing external challenges, the Egyptian government has revised its medium-term fiscal targets accordingly.
In summary, Egypt’s recent $1.2 billion disbursement from the IMF underscores positive strides in economic stabilization and reform implementation, despite facing numerous external and internal challenges. The endorsement of climate-related financial arrangements further reflects a commitment to sustainable development. Moving forward, the recommendations from the IMF regarding tax reforms and debt management will be essential for Egypt to address its fiscal challenges and promote long-term economic growth.
Original Source: www.arabnews.com
