IMF Approves Fund Facility for Egypt worth $3 Billion

The Executive Board of the International Monetary Fund (IMF) approved a 46-month arrangement under the Extended Fund Facility (EFF) for Egypt worth $3 billion). 

The IMF added that the decision allows for the immediate disbursement of $347 million to Egypt.

The statement stated that this step is expected to stimulate additional financing of about $14 billion from Egypt's international and regional partners.

The IMF Report

Following the Executive Board discussion, Kristalina Georgieva, Managing Director and Chairman of the Board, made the following statement:

“Egypt showed resilience to the COVID-19 crisis, supported by previous Fund-supported programs. While economic recovery gained momentum in 2021, imbalances also started building amidst a stable exchange rate, high public debt, and delayed structural reforms. Russia’s war in Ukraine crystallized these pre-existing vulnerabilities, triggering capital outflows, and, in the context of a still-stabilized exchange rate, reduced the central bank’s foreign reserves and banks’ net foreign assets and widened the exchange rate misalignment.

“The authorities’ recent commitment to a durable shift to a flexible exchange rate regime and to unwind prior policy distortions, supported by an upfront monetary policy tightening and further enhancements to the social safety net, are welcome steps.

Specifically, the package includes (i) a permanent shift to a flexible exchange rate regime to increase resilience against external shocks and to rebuild external buffers; (ii) monetary policy aimed at gradually reducing inflation in line with the central bank’s targets together with strengthening policy transmission, including by transitioning away from subsidizing lending schemes, (iii) fiscal consolidation and debt management to ensure downward trajectory in public-debt-to-GDP and contain gross financing needs, while increasing social spending and strengthening social safety net to protect the vulnerable, and managing national investment projects in a manner consistent with external sustainability and economic stability; and (iv) wide-ranging structural reforms to reduce the state footprint, level the playing field across all economic agents, facilitate private-sector-led growth, and strengthen governance and transparency in the public sector.