An International Monetary Fund (IMF) mission, led by Ivanna Vladkova Hollar, concluded its visit to Egypt on November 20, 2024. The team engaged in discussions with Egyptian authorities from November 6-20 in Cairo. Ms. Vladkova Hollar stated that significant progress was made regarding the fourth review under the Extended Fund Facility (EFF).
The discussions also addressed Article IV consultations focusing on medium-term challenges and opportunities. Additional reform measures were considered to mitigate macro-critical risks linked to climate change as part of Egypt's request for access to the Resilience and Sustainability Facility (RSF).
Ms. Vladkova Hollar noted the challenging economic outlook due to ongoing geopolitical tensions in the region, including conflicts in Gaza and Israel, which have impacted Suez Canal receipts—a vital source of foreign currency for Egypt—by up to 70 percent. The increase in refugees has added fiscal pressure on public services like health and education.
In response to these external challenges, Egyptian authorities have implemented reforms aimed at maintaining macroeconomic stability. These include unifying the exchange rate since March, reducing FX demand backlog, easing imports, and committing to a flexible exchange rate regime. Substantial monetary policy tightening has been undertaken to contain inflationary pressures despite administrative price increases.
"Going forward," Ms. Vladkova Hollar stated, "the focus needs to remain on ensuring inflation is on a firm downward trend toward the medium-term target." Continued fiscal discipline is also seen as crucial for reducing public sector debt vulnerabilities.
Promoting private sector development is identified as key for sustained macroeconomic stability and job creation in Egypt. The IMF mission welcomed plans by Egyptian authorities to streamline tax systems, improve customs procedures, and facilitate trade while encouraging further divestment plans.
Both parties agreed that tax policy reforms are essential for domestic revenue mobilization efforts needed to finance expenditure programs in health, education, and social safety nets while managing debt levels effectively.
Strengthening social safety nets was emphasized as important for protecting vulnerable groups from high living costs and energy price increases amidst tight policies.
The IMF mission will continue discussions with Egyptian authorities over the coming days to finalize agreements on remaining policies supporting the completion of the fourth review.