Egypt has secured a $1.2 billion IMF disbursement, totaling $3.2 billion under the Extended Fund Facility. This funding aims to stabilize the economy and promote structural reforms. The IMF acknowledges Egypt’s progress despite external challenges and stresses the importance of enhancing fiscal sustainability through improved tax compliance and debt management strategies.
Egypt has successfully obtained a $1.2 billion disbursement from the International Monetary Fund (IMF) after completing the fourth review of its economic reform program. This approval from the IMF’s Executive Board adds to the total funding of approximately $3.2 billion received under the Extended Fund Facility, which supports Egypt’s macroeconomic stability and structural reforms.
Additionally, the IMF sanctioned a $1.3 billion arrangement from the Resilience and Sustainability Facility aimed at bolstering Egypt’s climate-related reforms. The ongoing 46-month Extended Fund Facility program, initiated in December 2022, focuses on achieving macroeconomic stability and fostering sustainable growth.
Despite facing external challenges such as regional conflicts and trade disruptions, the IMF recognized Egypt’s strides in economic stabilization. Nigel Clarke, the IMF’s deputy managing director, noted significant progress made since March 2024 in rebuilding market confidence during adverse external conditions.
Egypt’s macroeconomic indicators show mixed recovery signals. The gross domestic product (GDP) growth rate has rebounded to 3.5% in the first quarter of fiscal year 2024-25, following a slowdown to 2.4% in 2023-24. Concurrently, inflation rates, which had spiked in preceding years, began to ease after September 2023, providing some relief to household incomes.
The government has also reported a primary fiscal surplus of 2.5% of GDP in 2023-24, an improvement attributed to stringent expenditure controls that mitigated lower domestic revenue. However, challenges such as high national debt levels and significant financing demands persist.
Egypt’s current account deficit increased to 5.4% of GDP for 2023-24, influenced by a $6 billion decline in Suez Canal receipts due to trade disruptions in the Red Sea. Nonetheless, remittances from overseas workers and robust tourism revenues have offered much-needed foreign exchange inflows.
To maintain fiscal sustainability, the IMF has advised Egypt to broaden its tax base, refine tax incentives, and enhance compliance. As emphasized by Clarke, creating fiscal space for essential developmental and social needs is crucial. Moreover, the IMF advocates for a comprehensive debt management strategy, enhancing fiscal transparency especially concerning off-budget entities.
In light of ongoing external pressures, the Egyptian government has revised its medium-term fiscal objectives accordingly.
In summary, Egypt’s recent $1.2 billion disbursement from the IMF underscores significant progress in economic reforms, despite external pressures. While macroeconomic indicators reflect recovery, ongoing fiscal challenges warrant attention, particularly high debt and current account deficits. To ensure sustainability, broadening the tax base and improving fiscal management are essential, alongside a focus on climate-related reforms.
Original Source: www.arabnews.com
