تقرير المجلس التنفيذي لصندوق النقد الدولي بشأن الموافقة على منح مصر الشريحة الرابعة بقيمة 1.2 مليار دولار (إنجليزي)

• The Executive Board of the International Monetary Fund (IMF) completed the fourth review of Egypt’s Extended Fund Facility (EFF) arrangement, allowing the authorities to draw the equivalent of about US$1.2 billion.
• The Egyptian authorities preserved macroeconomic stability amid a difficult regional environment, but progress on the structural reform agenda was mixed.
• Looking ahead, more decisive implementation of reforms will be critical to secure sustained and robust growth. Priorities comprise boosting domestic revenues, improving the business environment, accelerating divestment, and leveling the playing field, while enhancing governance and transparency.
• The Executive Board also approved the authorities’ request for an arrangement under the Resilience and Sustainability Facility (RSF) and completed the 2025 Article IV Consultation.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) has completed the fourth review of Egypt’s economic reform program supported by the EFF arrangement. This enables the authorities to immediately draw about US$1.2 billion (SDR 922.87 million), bringing Egypt’s total purchases under the EFF to about US$3,207 million (SDR 2,420.22 million or 119 percent of quota). Egypt’s 46-month EFF arrangement was approved on December 16, 2022. In addition, the IMF Executive Board approved the authorities’ request for an arrangement under the Resilience and Sustainability Facility (RSF), with access of about US$1.3 billion (SDR 1 billion). The Executive Board also concluded the 2025 Article IV consultation with Egypt.

The Egyptian authorities have continued to implement key policies to preserve macroeconomic stability, despite ongoing regional tensions that had caused a sharp decline in Suez Canal receipts.[1] While growth slowed to 2.4 percent in FY2023/24, down from 3.8 percent in the previous fiscal year, it recovered back to about 3.5 percent (y/y) in the first quarter of the current fiscal year (FY2024/25). Inflation has trended downward since September 2023. During the same period (FY2023/24), the current account deficit widened to 5.4 percent of GDP, while the primary fiscal balance improved by 1 percentage point to 2.5 percent of GDP, due to tight expenditure controls that have more than offset domestic revenue underperformance.

In light of the difficult external conditions, as well as the challenging domestic economic environment, the Executive Board approved the authorities’ request to recalibrate the authorities’ medium-term fiscal commitments. In particular, the primary balance surplus (excluding divestment proceeds) is expected to reach 4 percent of GDP next fiscal year (FY 2025/26) (½ percent of GDP less than earlier program commitments) and then increase to 5 percent of GDP in FY 2026/27 (in line with earlier commitments). Nonetheless, progress toward fiscal consolidation in the first half of FY2024/25 was less strong than initially projected under the program despite strong growth in tax revenue collections. The authorities are taking steps to contain spending in the second-half of the fiscal year, to ensure that the end-year fiscal target for FY 2024/25 is met.

The external environment is expected to remain challenging, as successive external shocks have continued and persisted. The ongoing war with Sudan precipitated a substantial influx of refugees, while trade disruptions in the Red Sea since December 2023 reduced foreign exchange inflows from the Suez Canal by US$6 billion in 2024. At the same time, remittances from Egyptian workers overseas and tourism receipts have remained robust. The shift to a flexible exchange rate regime in March 2024 has continued to produce positive results: gaps with the parallel rate remain closed, backlogs of unmet import demands are eliminated, and trading in the interbank market has increased, but the exchange rate fluctuates within a limited range. Looking ahead, continuous vigilance will be needed to ensure that this reform is consolidated further over time so that economic agents perceive the exchange rate as truly flexible.

Progress with the implementation of the structural reform agenda was mixed, with notable delays on critical reforms related to divestment and leveling the playing field. At the same time  the authorities have taken more decisive action this year with the implementation of a number of critical structural reforms, including through (i) steps to enhance the operational independence of the Egyptian Competition Authority (ECA), with a view to improving competition in product and service markets, and (ii) selecting an international consulting company to prepare a study on governance practices related to public banks to increase financial sector efficiency and transparency.

The authorities’ efforts to implement medium-term macro-critical reforms to address climate change is welcome. In this regard, the RSF arrangement will support key reforms to accelerate decarbonization, strengthen the management of environmental risks, and assess the effects of investment plans on achieving resilience.

At the conclusion of the Executive Board’s discussion, Mr. Nigel Clarke, Deputy Managing Director and Chair made the following statement:

“Since March 2024, the authorities have made considerable progress in stabilizing the economy and rebuilding market confidence despite a challenging external environment marked by persistent and successive external shocks, including regional conflicts and trade disruptions in the Red Sea.

“Notably, GDP growth has shown signs of recovery, inflation is gradually moderating, and foreign exchange reserves are at adequate levels. Fiscal consolidation under the EFF-supported program has progressed, with the government achieving a primary fiscal surplus of 2.5 percent of GDP (excluding divestment proceeds) in FY2023/24, alongside a declining debt-to-GDP ratio. High debt, substantial gross financing needs, and domestic rollover risks continue to present significant medium-term fiscal challenges, while mixed progress on structural reforms is hindering growth prospects, constraining private sector development.

“Strengthening fiscal sustainability requires both effective domestic revenue mobilization and a comprehensive debt management strategy. Broadening the tax base, streamlining tax incentives, and enhancing compliance are essential to creating fiscal space for priority development and social needs. At the same time, ensuring debt sustainability necessitates adopting a medium-term debt management strategy, including to deepen and further develop the domestic debt market, improving transparency over fiscal activities and strengthening fiscal oversight—particularly over off-budget entities—and accelerating divestment.

“To foster resilience and promote dynamic, inclusive, and export-led growth, the authorities must transition to a new economic model. Decisively reducing the state’s footprint, leveling the playing field, allowing energy prices to reach cost recovery levels, and addressing governance and transparency issues will enable the private sector to become the primary engine of growth. In this context, a flexible exchange rate, anchored by a robust inflation-targeting regime with an independent central bank and sound fiscal policies, is an essential policy tool that allows the economy to adjust to shocks. Meanwhile, implementing macro-critical climate reforms to address Egypt’s growing adaptation and mitigation needs will further enhance resilience.

“Despite progress, risks remain significant and skewed to the downside. The economic outlook is vulnerable to external shocks and domestic policy challenges. In particular, regional conflicts and trade disruptions could further strain fiscal revenues, foreign direct investment, and external stability. Domestically, needed reforms in energy prices and subsidies and tax policy carry social costs that must be carefully managed, while the state’s extended role in non-strategic sectors and limited efforts to enhance market competition could impact medium-term growth.”

Executive Board Assessment[2]

Executive Directors agreed with the thrust of the staff appraisal. They recognized the authorities’ progress in stabilizing the economy and rebuilding market confidence despite a challenging external environment. Directors acknowledged the improvement in economic activity and progress in restoring foreign exchange reserves to adequate levels. They noted however that the economic landscape remains fragile, affected by regional conflicts and trade disruptions in the Red Sea, while debt and gross financing needs are high and present significant medium-term fiscal challenges.

Against the backdrop of mixed program performance, Directors called for stepped up implementation and vigilant monitoring of program commitments. They emphasized the need for strong commitment and ownership of structural reforms to create the conditions for durable and inclusive growth and to ensure a sustained reduction in vulnerabilities while meeting Egypt’s development and social goals.

Looking ahead, Directors underlined that strengthening fiscal sustainability is a priority that requires effective domestic revenue mobilization and allowing energy prices to reach cost recovery levels, a comprehensive debt management strategy, strengthened fiscal oversight—particularly over off-budget entities, and accelerated divestment.

Directors agreed that maintaining a liberalized foreign exchange system in the context of a flexible exchange rate regime is critical to avoid the buildup of external imbalances and emphasized the importance of maintaining movements in the foreign exchange rate in response to supply and demand for foreign exchange. They also considered a robust inflation-targeting regime, with an independent central bank and sound fiscal policies, to be essential.

Directors urged the authorities to step up their structural reform efforts to promote higher, sustainable, inclusive, and job-led growth. They emphasized the need to take decisive measures to re-start divestment efforts, firmly reduce the state’s footprint, and level the playing field. These efforts will enable the private sector to become the primary engine of growth.

Directors noted that implementing macro-critical climate reforms while crowding-in private investors to address Egypt’s growing adaptation and mitigation needs will further enhance economic resilience. They agreed that these reforms will complement and reinforce the risk mitigation efforts under the Extended Arrangement.

Directors supported the completion of the fourth review under the EFF arrangement and the authorities’ request for waivers of nonobservance and modification of performance criteria. They also supported their request for an arrangement under the Resilience and Sustainability Facility (RSF).

It is expected that the next Article IV consultation with Egypt will be held in accordance with the Executive Board decision on consultation cycles for members with Fund arrangements

[1] See IMF Press Release 24/500 of December 24, 2024, for further details on recent discussions. IMF Reaches Staff Level Agreement on the Fourth Review of the Extended Fund Facility with Egypt

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.