The IMF’s fourth review of Egypt’s loan allows for a $1.2 billion drawdown as total disbursements reach $3.2 billion. The IMF also approved $1.3 billion for climate-related reforms. Despite economic stabilization signs, such as GDP growth and moderating inflation, challenges persist, including high debt and mixed structural reforms.
The IMF has completed its fourth review of Egypt’s $8 billion Extended Fund Facility loan, enabling the country to withdraw approximately $1.2 billion. This disbursement increases the total funds released under this program to around $3.2 billion since its approval in December 2022. Additionally, the IMF approved a new $1.3 billion arrangement under the Resilience and Sustainability Facility to aid reforms against climate change, with more details forthcoming.
The IMF’s review highlights Egypt’s efforts to stabilize its economy, showing signs of GDP growth recovery, moderating inflation, and sufficient foreign reserves. However, structural reform progress has been inconsistent, impacting growth prospects and private sector expansion. High national debt and significant financing needs remain critical fiscal challenges in the medium term.
IMF Deputy Managing Director Nigel Clarke emphasized the necessity for fiscal sustainability through enhanced domestic revenue collection and a comprehensive debt management strategy, advocating for reduced state involvement to empower the private sector as a growth driver. Recent data reveals Egypt’s inflation rate fell from 24% in January to 12.8% in February, the lowest since March 2022, although economists warn this decrease may relate more to a favorable base effect amid ongoing economic uncertainties.
Potential inflationary pressures may arise from expected subsidy cuts, the resumption of the Gaza war, and economic actions by the US government that could increase import costs for Egypt. The Central Bank of Egypt has maintained high-interest rates since March 2024, complying with IMF recommendations to address economic overheating.
Egypt sought IMF support following Russia’s Ukraine invasion, leading to a currency devaluation of nearly 70% since March 2022, transitioning to a flexible exchange rate system. The IMF noted continued positive outcomes from this system, although experts argue the currency is still influenced by government management. Looking forward, the IMF cautioned that significant risks, including external shocks and domestic policy challenges, could hinder Egypt’s economic stability, stressing the importance of managing social impacts from necessary fiscal reforms.
In summary, the IMF’s fourth loan review for Egypt highlights progress in economic stabilization, allowing for additional financial support. While GDP growth is recovering and inflation is decreasing, significant challenges such as high debt levels and structural reform inconsistencies persist. The IMF continues to recommend strategies for enhancing fiscal sustainability and addressing potential risks to Egypt’s economic outlook.
Original Source: www.thenationalnews.com
