Egypt has unlocked an additional $2.5 billion loan from the IMF after completing the fourth review of its economic reform program, aiming to stabilize its economy amidst external challenges. The government is expected to achieve a primary fiscal surplus while implementing structural reforms to foster competitiveness and address climate change.
Egypt has successfully secured an additional loan of $2.5 billion from the International Monetary Fund (IMF) following the completion of the fourth review of its economic reform program. The IMF confirmed this achievement, which is part of a longer 46-month extended fund facility that commenced on December 16, 2022. As a result, Egypt can immediately access approximately $1.2 billion, raising total disbursements to nearly $3.207 billion, which is 119 percent of its quota.
In conjunction with this approval, the IMF also sanctioned Egypt’s request for an arrangement under the Resilience and Sustainability Facility (RSF), allowing access to an additional $1.3 billion. The IMF concluded its 2025 Article IV consultation with Egypt, highlighting the ongoing implementation of key policies aimed at macroeconomic stability, despite regional tensions contributing to a decrease in Suez Canal revenues.
Egypt’s economic growth slowed to 2.4 percent in fiscal year 2023/24, down from 3.8 percent previously, although year-on-year growth rebounded to approximately 3.5 percent in the first quarter of the current fiscal year. Despite a downward trend in headline inflation since September 2023, the current account deficit has widened to 5.4 percent of GDP; however, the primary fiscal balance has improved by one percentage point to 2.5 percent of GDP due to strict expenditure control measures.
The IMF noted that the Executive Board approved a recalibration of the government’s medium-term fiscal commitments in light of ongoing domestic and external challenges. Specifically, it anticipates that the primary balance surplus, excluding divestment proceeds, will reach 4 percent of GDP in FY 2025/26 and increase to 5 percent in FY 2026/27, albeit with slower-than-expected progress toward fiscal consolidation initially projected under the program.
As external conditions remain turbulent, including ongoing conflicts and trade disruptions affecting the Red Sea, IMF officials acknowledge the challenges posed by an influx of refugees from the conflict in Sudan. Conversely, strong remittances from Egyptian expatriates and a robust tourism sector continue to positively impact the economy.
The transition to a flexible exchange rate regime, initiated in March 2024, has yielded advantageous outcomes. Gaps with the parallel rate have diminished, import demand has been effectively managed, and interbank trading activity has risen, although the exchange rate retains limited fluctuations. The IMF reaffirmed the importance of continued vigilance to solidify perceptions of this reform as being genuinely flexible.
Progress regarding structural reform has experienced a mixed trajectory, with noticeable delays in crucial reform areas like divestment. Nonetheless, the Egyptian authorities have made considerable strides in implementing essential reforms aimed at enhancing market competition and improving financial sector governance.
Furthermore, the authorities’ focus on essential medium-term reforms to address climate change has been positively received. The RSF arrangement supports critical reforms designed to promote decarbonization, environmental risk management, and investment-related assessments for resilience.
In a closing statement, Mr. Nigel Clarke, Deputy Managing Director and Chair, emphasized the significant advancements in economic stabilization and market confidence amidst substantial external challenges, including persistent regional conflicts and trade disruptions. He noted encouraging signs of GDP recovery, decreased inflation, and adequate foreign exchange reserves, while also acknowledging the substantial risks associated with ongoing high debt and financing needs that will necessitate effective management strategies moving forward.
In summary, Egypt has successfully unlocked a critical $2.5 billion loan from the IMF following the completion of a review of its economic reform program. The nation faces various challenges, including fluctuating growth rates and regional tensions, yet demonstrates resilience through robust remittance and tourism revenues. Continuous reform efforts, particularly in fiscal policy and climate-related initiatives, remain imperative for sustainable economic stability and growth.
Original Source: dmarketforces.com
