Egypt secures $1.2bn IMF disbursement amid reforms

RIYADH: Egypt has secured a $1.2 billion disbursement from the International Monetary Fund following the completion of the fourth review of its economic reform program.

This disbursement, approved by the IMF’s Executive Board under the Extended Fund Facility, brings Egypt’s total funding under the program to approximately $3.2 billion.

In addition, the IMF has approved a $1.3 billion arrangement under the Resilience and Sustainability Facility to support Egypt’s climate-related reforms.

The 46-month EFF arrangement, which was initially approved in December 2022, is designed to promote macroeconomic stability and drive structural reforms to support sustainable growth. The IMF has acknowledged Egypt’s progress in stabilizing its economy, despite external challenges such as regional conflicts and trade disruptions.

“Since March 2024, the authorities have made considerable progress in stabilizing the economy and rebuilding market confidence despite a challenging external environment,” said Nigel Clarke, deputy managing director and chair of the IMF executive board.  

Macroeconomic indicators show a mixed recovery for Egypt. Gross domestic product growth, which slowed to 2.4 percent in the fiscal year 2023-24 from 3.8 percent the previous year, rebounded to 3.5 percent in the first quarter of the fiscal year 2024-25.

Inflation, which had surged in recent years, has been gradually moderating since September 2023, alleviating some pressure on household incomes.

Meanwhile, the government achieved a primary fiscal surplus of 2.5 percent of GDP in 2023-24, marking a one-percentage-point improvement from the previous year. This was primarily driven by expenditure controls, which helped offset weaker domestic revenue performance.

Despite several improvements, Egypt continues to face significant fiscal challenges, including high debt levels and substantial financing needs. The country’s current account deficit widened to 5.4 percent of GDP in 2023-24, largely due to a $6 billion drop in Suez Canal receipts in 2024, caused by trade disruptions in the Red Sea.

However, remittances from Egyptian workers abroad and strong tourism revenues have provided crucial foreign exchange inflows.

To ensure fiscal sustainability, the IMF has recommended that Egypt expand its tax base, streamline tax incentives, and improve compliance. As IMF spokesperson Clarke noted, “Broadening the tax base, streamlining tax incentives, and enhancing compliance are essential to creating fiscal space for priority development and social needs.”

Additionally, the IMF stressed the importance of a comprehensive debt management strategy, which includes deepening the domestic debt market and enhancing fiscal transparency, particularly concerning off-budget entities.

In response to external challenges, the Egyptian government has adjusted its medium-term fiscal targets.