The International Monetary Fund (IMF) Executive Board has completed the fourth review of Egypt's economic reform program under the Extended Fund Facility (EFF). This completion allows Egypt to draw approximately US$1.2 billion, increasing total purchases under the EFF to about US$3.207 billion. The EFF arrangement for Egypt was initially approved on December 16, 2022. Additionally, the IMF approved Egypt's request for an arrangement under the Resilience and Sustainability Facility (RSF), granting access to around US$1.3 billion.
Egyptian authorities have continued efforts to maintain macroeconomic stability amid regional tensions affecting Suez Canal revenues. Growth decreased to 2.4% in FY2023/24 but rebounded to approximately 3.5% in the first quarter of FY2024/25. Inflation has been declining since September 2023, although the current account deficit widened during FY2023/24.
Given challenging external conditions and domestic economic challenges, the IMF Executive Board agreed to recalibrate Egypt’s medium-term fiscal commitments. The primary balance surplus is expected to reach 4% of GDP in FY2025/26 and increase to 5% by FY2026/27.
External challenges remain significant due to ongoing conflicts and trade disruptions impacting foreign exchange inflows from the Suez Canal by US$6 billion in 2024. However, remittances and tourism receipts have remained stable.
Structural reforms show mixed progress with delays noted in critical areas such as divestment and market competition enhancement. Nevertheless, decisive actions were taken this year, including steps towards enhancing competition authority independence and improving governance practices in public banks.
Efforts towards climate change reforms are acknowledged positively with RSF support aimed at accelerating decarbonization and strengthening environmental risk management.
Nigel Clarke, Deputy Managing Director and Chair of the IMF Executive Board stated: "Since March 2024, the authorities have made considerable progress in stabilizing the economy and rebuilding market confidence despite a challenging external environment marked by persistent and successive external shocks."
He added that while GDP growth shows recovery signs with moderating inflation levels, significant medium-term fiscal challenges persist due to high debt levels alongside structural reform progress hindering growth prospects.
The Executive Directors supported completing the fourth review under EFF arrangements while emphasizing strong commitment towards structural reforms for sustainable growth.