The IMF has completed the fourth review of Egypt’s EFF arrangement, allowing access to $1.2 billion. Despite macroeconomic stability under challenging conditions, the need for decisive reforms remains critical for sustainable growth. The approved Resilience and Sustainability Facility will further support economic reforms aimed at climate resilience. The current economic outlook emphasizes fiscal consolidation and structural reform to ensure long-term viability.
The International Monetary Fund (IMF) has recently completed the fourth review of Egypt’s Extended Fund Facility (EFF) arrangement, which enables access to approximately $1.2 billion in funding. This decision reflects the Egyptian authorities’ efforts to maintain macroeconomic stability despite significant regional challenges. Future growth relies on decisive reforms focused on enhancing domestic revenues, improving business conditions, and ensuring governance and transparency.
The review confirmed that the EFF arrangement, initiated on December 16, 2022, has led to total disbursements of around $3.2 billion. Additionally, the Executive Board approved Egypt’s request for funding under the Resilience and Sustainability Facility (RSF) amounting to $1.3 billion. Despite progress, growth has slowed to 2.4% in FY2023/24 compared to the previous year, although signs of recovery were noted in the first quarter of FY2024/25 with a growth of 3.5%.
Inflation rates have also shown a downward trend, with the current account deficit widening to 5.4% of GDP in FY2023/24. The primary fiscal balance improved marginally, aided by stringent expenditure controls amid revenue challenges. The government is focusing on curbing spending to meet fiscal targets for FY2024/25, while recalibrating medium-term fiscal commitments reflects the backdrop of constant external pressures.
Continued external challenges include regional conflicts and reduced Suez Canal revenues, which have created strain on foreign exchange inflows. Nonetheless, the shift to a flexible exchange rate in March 2024 has proven beneficial, with improvements in the interbank market and resolution of import demand backlogs. Vigilance is necessary to maintain the effectiveness of this reform.
Progress in structural reforms has seen both delays and advances. Noteworthy developments include enhancing the independence of the Egyptian Competition Authorities and engaging an international consultant to review public banking governance. These reforms are vital for increasing efficiency and transparency within the financial sector.
The RSF is expected to facilitate reforms targeting climate change, promoting decarbonization and environmental risk management. The IMF has recognized Egypt’s efforts to stabilize its economy amid the external pressures and expressed the necessity for sustained fiscal consolidation and structural reforms to foster long-term growth and resilience.
The IMF’s recent review of Egypt’s economic program under the Extended Fund Facility underscores the country’s ongoing efforts to navigate a challenging economic landscape. With funding to support macroeconomic stability and critical reforms addressing structural issues, the focus remains on sustainability and resilience. Moving forward, continued commitment to structural reforms, fiscal discipline, and climate initiatives will be essential for Egypt’s growth and economic development.
Original Source: www.miragenews.com
