The IMF has approved $2.5 billion for Egypt after its fourth economic review, comprising $1.2 billion disbursement and $1.3 billion under the Resilience and Sustainability Facility. Despite facing economic challenges, Egypt has shown signs of macroeconomic stability, with recovery in growth and improved fiscal balance. The external environment remains challenging, but some sectors like tourism and remittances are stable.
The International Monetary Fund (IMF) has completed its fourth review of Egypt’s economic reform program and approved a $1.2 billion disbursement. Additionally, Egypt requested and the IMF approved an arrangement under the Resilience and Sustainability Facility, granting access to approximately $1.3 billion. This latest funding increases Egypt’s total purchases under the Extended Fund Facility (EFF) to around $3.207 billion, representing 119 percent of its quota. The 46-month EFF arrangement was initially approved on December 16, 2022.
Despite facing ongoing regional tensions that have adversely affected Suez Canal receipts, Egyptian authorities have implemented key policies to maintain macroeconomic stability. Economic growth in FY2023-24 slowed to 2.4 percent from 3.8 percent in the previous fiscal year; however, a recovery to approximately 3.5 percent year-on-year was noted in the first quarter of FY2024-25.
Inflation has generally declined since September 2023, even as the current account deficit widened to 5.4 percent of GDP during FY2023-24. Conversely, the primary fiscal balance improved by 1 percentage point to 2.5 percent of GDP, attributed to strict expenditure controls offsetting underperformance in domestic revenue. The IMF acknowledged the authorities’ request to readjust medium-term fiscal commitments due to challenging economic conditions.
The outlook indicates continued challenges in the external environment, with the IMF noting persistent external shocks. The ongoing conflict in Sudan has led to increased refugee inflows, while trade disruptions in the Red Sea reduced foreign exchange earnings from the Suez Canal by approximately $6 billion in 2024. Nevertheless, remittances from Egyptian workers abroad and tourism revenue have remained sturdy.
After discussions, Nigel Clarke, IMF Deputy Managing Director, emphasized the efforts made since March 2024 to stabilize the economy and boost market confidence in light of external challenges, including regional conflicts and trade disruptions.
The IMF’s approval of $2.5 billion for Egypt post-economic reform review underscores the nation’s efforts to maintain macroeconomic stability amid external challenges. Key economic indicators show slight growth recovery and better fiscal balance despite ongoing difficulties, with stringent policies implemented by Egyptian authorities. Future projections highlight the need for continued vigilance as external shocks persist, although some economic sectors remain robust.
Original Source: economymiddleeast.com
