Egypt has received a $1.2 billion IMF disbursement, raising total funding to $3.2 billion, alongside a $1.3 billion climate reform arrangement. The economy shows a mixed recovery with GDP growth rebounding and inflation easing, yet significant fiscal challenges persist. The IMF recommends expanding the tax base and improving compliance for fiscal sustainability.
Egypt has successfully secured a $1.2 billion disbursement from the International Monetary Fund (IMF) following the completion of its fourth economic reform program review. This funding approval by the IMF’s Executive Board under the Extended Fund Facility raises the total funding received by Egypt to approximately $3.2 billion under this program. Furthermore, the IMF has sanctioned an additional $1.3 billion allocation under the Resilience and Sustainability Facility aimed at facilitating Egypt’s climate-related reform endeavors.
The Extended Fund Facility, which began in December 2022 and spans 46 months, aims to foster macroeconomic stability and implement structural reforms for sustainable growth. The IMF has recognized Egypt’s advancements in economic stabilization, particularly amid external disturbances such as regional conflicts and trade interruptions. As noted by Nigel Clarke, the IMF’s deputy managing director and executive board chair, substantial progress in stabilizing the economy has been made since March 2024, despite the arduous external landscape.
Current macroeconomic indicators reflect a mixed recovery trajectory for Egypt. The country’s gross domestic product (GDP) growth decreased to 2.4% for the fiscal year 2023-24, down from 3.8% the prior year, yet showed signs of recovery with a rebound to 3.5% in the first quarter of fiscal year 2024-25. Inflation, which had previously escalated, has been gradually diminishing since September 2023, thereby alleviating financial pressures on household incomes.
Moreover, the Egyptian government achieved a primary fiscal surplus of 2.5% of GDP in 2023-24, signifying a one-percentage-point enhancement from the previous year, attributed largely to expenditure management. Despite these advancements, Egypt continues to grapple with significant fiscal hurdles, including elevated debt levels and substantial financing requirements. The current account deficit increased to 5.4% of GDP in 2023-24, largely influenced by a $6 billion decline in Suez Canal receipts due to trade disruptions.
Nevertheless, the inflow of remittances from Egyptians abroad and the robust performance of the tourism sector have been pivotal in supplying essential foreign exchange reserves. To bolster fiscal sustainability, the IMF has advised that Egypt broaden its tax base, simplify tax incentives, and enhance compliance. As emphasized by spokesperson Clarke, establishing a broader tax base and improving compliance is vital for developing fiscal space for essential developmental and social initiatives. Furthermore, the IMF has advocated for a holistic debt management strategy that emphasizes deepening the domestic debt market and augmenting fiscal transparency regarding off-budget entities.
In light of external challenges, the Egyptian government has consequently adapted its medium-term fiscal objectives.
In summary, Egypt has attained a $1.2 billion disbursement from the IMF, augmenting its total funding to $3.2 billion under the Extended Fund Facility. Despite strides toward stabilizing the economy and creating a primary fiscal surplus, the nation continues to confront significant fiscal challenges. Recommendations from the IMF focus on expanding the tax base, improving compliance, and adopting a comprehensive debt management strategy to enhance fiscal sustainability amid ongoing external pressures.
Original Source: www.arabnews.com
