Egypt has received a $1.2 billion IMF disbursement, totaling $3.2 billion under the EFF program. The IMF commended Egypt’s economic stabilization efforts despite external challenges. While GDP growth and inflation are showing mixed recovery, significant fiscal hurdles remain, prompting the IMF’s recommendations for tax reform and better debt management.
Egypt has successfully secured a $1.2 billion disbursement from the International Monetary Fund (IMF) following the conclusion of the fourth review of its economic reform program. This funding, which has been approved by the IMF’s Executive Board under the Extended Fund Facility (EFF), contributes to a total of approximately $3.2 billion disbursed to Egypt under this program. Further, the IMF has also sanctioned a $1.3 billion arrangement through the Resilience and Sustainability Facility aimed at supporting Egypt’s climate-related reforms.
The EFF arrangement, originally approved in December 2022, spans 46 months and is crafted to enhance macroeconomic stability while promoting structural reforms geared towards sustainable economic growth. The IMF has commended Egypt’s efforts in stabilizing its economy amid external challenges, including regional conflicts and disruptions in trade.
Nigel Clarke, the 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.” Recent macroeconomic indicators reveal a mixed recovery trajectory for Egypt. The nation’s Gross Domestic Product (GDP) growth decreased to 2.4 percent in the fiscal year 2023-24 from 3.8 percent in the previous year, before rebounding to 3.5 percent in the first quarter of the fiscal year 2024-25.
Inflation, which had escalated in recent years, has been gradually subsiding since September 2023, providing some relief to household incomes. Additionally, the government recorded a primary fiscal surplus of 2.5 percent of GDP in 2023-24, an increase of one percentage point from the previous year, primarily attributable to controlled expenditures that mitigated the impact of weaker domestic revenue performance.
Despite these advancements, several fiscal challenges remain, notably high debt levels and significant financing needs. The current account deficit widened to 5.4 percent of GDP in 2023-24, influenced by a $6 billion reduction in Suez Canal revenues in 2024 due to trade disruptions in the Red Sea. Nonetheless, remittances from Egyptian expatriates and robust tourism revenues have provided essential foreign exchange inflows.
To secure fiscal sustainability, the IMF has advised Egypt to broaden its tax base, streamline tax incentives, and enhance tax compliance. As clarified by Clarke, “Broadening the tax base, streamlining tax incentives, and enhancing compliance are essential to creating fiscal space for priority development and social needs.” The IMF also underscored the necessity for a thorough debt management strategy that involves deepening the domestic debt market and improving fiscal transparency, particularly concerning off-budget entities. In light of external challenges, the Egyptian government has recalibrated its medium-term fiscal targets.
In summary, Egypt’s recent $1.2 billion disbursement from the IMF represents a significant step towards stabilizing its economy amidst ongoing external challenges. The approval of additional funding for climate reforms signifies a commitment to sustainable growth. However, important fiscal challenges, such as high debt and a widening current account deficit, must be addressed. The IMF’s recommendations on enhancing the tax base and improving debt management are crucial for ensuring long-term fiscal sustainability.
Original Source: www.arabnews.com
