The IMF approved $2.5 billion for Egypt, consisting of a $1.2 billion disbursement and $1.3 billion under the Resilience and Sustainability Facility. Despite regional challenges and a slowdown in growth, Egypt is making strides in maintaining macroeconomic stability. The primary fiscal balance is projected to improve in the coming years amid ongoing external pressures.
The International Monetary Fund (IMF) has finalized its fourth review of Egypt’s economic reform program, authorizing a disbursement of $1.2 billion. Additionally, it approved Egypt’s request for access to approximately $1.3 billion under the Resilience and Sustainability Facility. This brings Egypt’s total purchases under the Extended Fund Facility (EFF) to around $3.207 billion, totaling 119 percent of the quota. The EFF arrangement, valid for 46 months, was initially approved on December 16, 2022.
The Egyptian government has persisted in implementing critical policies aimed at maintaining macroeconomic stability despite regional issues that have significantly decreased revenue from the Suez Canal. Growth has slowed to 2.4 percent for the fiscal year 2023-24, down from 3.8 percent previously, although a recovery to approximately 3.5 percent (year-on-year) has been observed in the first quarter of FY2024-25. Inflation rates have been declining since September 2023, and while the current account deficit rose to 5.4 percent of GDP, the primary fiscal balance improved to 2.5 percent of GDP due to stringent expenditure controls offsetting revenue shortfalls.
The IMF has acknowledged the ongoing external challenges and the necessity for Egypt to adjust its medium-term fiscal commitments. They project a primary balance surplus, excluding divestment proceeds, to reach 4 percent of GDP in FY2025-26, with an eventual increase to 5 percent of GDP in FY2026-27.
Persisting adversities remain evident, as the IMF cautioned that the external environment is likely to present significant challenges. The conflict in Sudan has resulted in a surge of incoming refugees, while Red Sea trade disruptions since December 2023 have led to a $6 billion revenue decline in foreign exchange inflows from the Suez Canal in 2024. Nevertheless, both remittances from Egyptian expatriates and tourism revenues have remained strong.
In discussing the board’s deliberation, Nigel Clarke, the deputy managing director, acknowledged significant advancements made by Egypt in stabilizing the economy and enhancing market confidence amid a challenging external context marked by continued external shocks, including regional conflicts and trade interruptions in the Red Sea.
The IMF’s approval of an additional $2.5 billion for Egypt demonstrates the country’s ongoing commitment to reform and resilience amid economic challenges. The approval signifies a collaborative effort to stabilize Egypt’s economy while navigating the impacts of external factors such as geopolitical conflicts and market fluctuations. These developments are vital for fostering growth and maintaining macroeconomic stability in the near future.
Original Source: economymiddleeast.com
