IMF, Egypt Reach Agreement on $5.2 Billion Stand-by Arrangement

An International Monetary Fund (IMF) team, led by Uma Ramakrishnan, reached a staff-level agreement with the Egyptian authorities on the first review of the stand-by arrangement.

The Egyptian authorities discussed, in virtual meetings from 4 to 15 November, recent economic developments and policy priorities in the first review of Egypt's economic reform program supported by the IMF's 12-month arrangement.

Ramakrishnan said in a statement, "The IMF team of experts and the Egyptian authorities reached an agreement at the staff level regarding the first review of the Egyptian economic program supported by the IMF Reserve Preparedness Arrangement of $5.2 billion.

The statement added that this agreement is subject to the approval of the Executive Board of the International Monetary Fund, which will be held in the coming weeks.

Upon approval, an additional Special Drawing Rights SDR of about $1.6 billion will be made available to Egypt.

"The Egyptian economy has performed better than expected despite the pandemic," She added, stressing that the containment measures, supported by effective crisis management as well as the careful implementation of the reform program, helped mitigate the effects of the crisis.

After recording a growth rate of 3.6 percent in FY2019/20, growth is projected to reach 2.8 percent in FY2020/21, with a modest recovery in all sectors except tourism, as the pandemic continues to disrupt international travel. Pandemic-related risks still exist in light of the second global wave of COVID-19 cases." the statement read.

Egypt Recorded a growth rate of 3.6% in the 2019/20 fiscal year, growth is expected to record 2.8% in FY 2020/21, with a modest recovery in all sectors except tourism, as the pandemic continues to disrupt international flights. So far, the risks remain associated with a second global wave of COVID-19 is listed.

The net accumulation of international reserves and core balance exceeded the program targets, as the authorities’ commitment and strong performance helped achieve targeted growth.

In September, inflation recorded 3.7% , primarily reflecting lower food prices, and triggered the monetary policy consultation clause," the statement said, adding that the new customs law was passed to simplify customs procedures ahead of schedule.

“We welcome the Central Bank of Egypt’s (CBE) monetary policy in recent interest rate cuts to further support economic recovery amid muted inflation. The exchange rate has modestly appreciated in the wake of an increase in capital inflows. Continued exchange rate flexibility will help absorb external shocks. Egypt's banking system remains liquid, profitable, and well capitalized." Ramakrishnan said in a statement.

“Egypt’s fiscal policy in FY 2020/21 remains appropriately focused on supporting the immediate priorities in health, protecting the most vulnerable, and supporting sectors affected most by the pandemic, and remains on track to achieve a primary surplus of 0.5% of GDP," she pointed out.

She noted that the government’s commitment to return to a primary surplus of 2% of GDP will be essential to reduce public debt and support fiscal stability.

The recent publication of contracts awarded for COVID-19-related spending is a welcome step towards increasing transparency and the team encourages continued updates to these publications," the statement concluded.