The IMF has sanctioned $2.5 billion for Egypt, including $1.2 billion from a recent review and $1.3 billion via the resilience facility. Despite economic challenges, growth shows signs of recovery, and fiscal balance improves as policies are effectively implemented, although external pressures persist.
The International Monetary Fund (IMF) has concluded the fourth review of Egypt’s economic reform program and approved a significant disbursement of $1.2 billion. Additionally, the IMF’s executive board sanctioned Egypt’s request for participation in the resilience and sustainability facility, which grants access to approximately $1.3 billion. This recent funding under the extended fund facility (EFF) program elevates Egypt’s total purchases under the EFF to around $3.207 billion, constituting 119 percent of the nation’s quota.
Following the approval of a 46-month EFF arrangement on December 16, 2022, the Egyptian government has actively pursued key policies aimed at maintaining macroeconomic stability. Despite regional tensions that have adversely impacted Suez Canal revenues, the economy experienced some recovery, with growth rebounding to approximately 3.5 percent year-on-year during the first quarter of the fiscal year 2024-25, following a decline to 2.4 percent in FY2023-24.
The IMF noted a downward trend in inflation since September 2023, despite the current account deficit widening to 5.4 percent of GDP during FY2023-24. The primary fiscal balance improved by one percentage point to 2.5 percent of GDP, attributed to stringent expenditure controls that offset shortcomings in domestic revenue. The IMF indicated that the authorities’ recalibrated fiscal commitments anticipate a primary balance surplus of 4 percent of GDP in FY2025-26 and 5 percent in FY2026-27.
Amid these developments, the external environment remains difficult, with the IMF acknowledging ongoing external shocks. The conflict in Sudan has led to a considerable influx of refugees, and trade disruptions in the Red Sea have curtailed foreign exchange inflows from the Suez Canal by $6 billion in 2024. Nonetheless, remittances from Egyptian nationals abroad and tourism revenues have remained resilient.
In concluding the executive board discussion, Nigel Clarke, deputy managing director and chair, remarked on the substantial progress made by the Egyptian authorities in stabilizing the economy and restoring market confidence, despite the prevailing external challenges, including persistent regional conflicts and trade issues.
The IMF’s recent approval of $2.5 billion for Egypt underscores the nation’s ongoing economic reforms and the resilience displayed amid external challenges. Despite a slowdown in growth and a widening current account deficit, Egypt’s fiscal policies have improved its primary balance. The international community continues to support Egypt’s efforts toward macroeconomic stability, even as external pressures pose significant hurdles ahead.
Original Source: economymiddleeast.com
