IMF Approves $1.2 Billion Disbursement to Egypt

The International Monetary Fund (IMF) announced  that the Fund's Executive Board completed the fourth review of Egypt's economic reform program supported by the Fund's Extended Facility (EFF) arrangement on Monday.

The IMF said the completion of the review enables the Egyptian authorities to immediately access approximately $1.2 billion (SDR 922.87 million).

The IMF Executive Board also approved the authorities' request for an arrangement under the Flexible and Sustainability Facility (RSF), with access to approximately $1.3 billion (SDR 1 billion), according to the Fund's statement.

The Executive Board also concluded the 2025 Article IV consultation with Egypt, according to the statement.

The IMF said in its statement that the Egyptian authorities continued to implement key policies to maintain macroeconomic stability, despite ongoing regional tensions that have caused a sharp decline in Suez Canal revenues.

He added that while growth slowed to 2.4% in fiscal year 2023-24, down from 3.8% in the previous fiscal year, it recovered to around 3.5% (annualized) in the first quarter of the current fiscal year (2024-25).

The Fund noted that inflation has been trending downward since September 2023. During the same period (2023-24), the current account deficit widened to 5.4% of GDP, while the primary fiscal balance improved by 1 percentage point to 2.5% of GDP, thanks to strict spending controls that more than offset weak domestic revenue performance.

The Fund stated that, in light of the challenging external conditions, as well as the challenging domestic economic environment, the Executive Board approved the authorities' request to recalibrate their medium-term fiscal commitments. In particular, the primary balance surplus (excluding exit proceeds) is expected to reach 4% of GDP in the next fiscal year (FY2025-26) (0.5% of GDP lower than previous program commitments), rising to 5% of GDP in FY2026-27 (in line with previous commitments).

However, progress toward fiscal consolidation in the first half of FY2024-25 was less robust than initially projected under the program, despite strong growth in tax revenue collection. The authorities are taking steps to contain spending in the second half of the fiscal year to ensure the fiscal target for the end of FY2024-25 is met.

According to the IMF statement, the external environment is expected to remain challenging for the Egyptian economy, with successive external shocks persisting. The ongoing war with Sudan has led to a large influx of refugees into Egypt, while trade disruptions in the Red Sea since December 2023 have reduced foreign exchange inflows from the Suez Canal by $6 billion in 2024.

At the same time, remittances from Egyptian workers abroad and tourism revenues have remained strong. The transition to a flexible exchange rate regime in March 2024 has continued to yield positive results: gaps with the parallel exchange rate have remained closed, backlogs of unmet import demand have been eliminated, and trading in the interbank market has increased, but the exchange rate has fluctuated within a narrow range, according to the IMF.

"Looking ahead, continued vigilance will be needed to ensure this reform is further entrenched over time until economic actors perceive the exchange rate to be truly flexible," the IMF said.