The International Monetary Fund (IMF) on Tuesday reached an agreement with Egypt, allowing the country to access approximately $1.2 billion. This follows the successful completion of the fourth review under the Extended Fund Facility (EFF) arrangement, designed to support Egypt’s economic recovery.
“The Egyptian authorities have continued to implement key policies to preserve macroeconomic stability, despite ongoing regional tensions that have significantly impacted Suez Canal revenues,” stated Ivanna Vladkova Hollar, the IMF’s Egypt mission chief.
However, the IMF emphasized the urgency of accelerating the government’s exit from the economy, a crucial aspect of the reform agenda. This echoes recent World Bank findings that highlighted the state’s dominance as a major obstacle to economic recovery. The successful sale of Ras El Hekma earlier this year provided a temporary lifeline, but sustainable growth requires a more fundamental shift towards private sector-led development.
The fund’s call for reduced state intervention and a level playing field for private businesses is essential for attracting foreign investment and unlocking Egypt’s full economic potential.
Inflation and Revenue Mobilization
While Egypt’s urban inflation rate dipped to 25.5 percent in November, citizens continue to grapple with rising living costs. The IMF acknowledged the government’s efforts to streamline the tax system but stressed the need for further reforms to enhance domestic revenue mobilization. A key concern is the prevalence of tax exemptions for state-owned and military-owned companies, which contradicts the broader goal of reducing state dominance in the economy.
Reinforcing Reform Urgency
While the IMF previously showed some flexibility regarding the pace of economic disengagement, the fund now appears to be reasserting the urgency of private sector-led reforms. Moving forward, Egypt has agreed to prioritize policies that boost domestic revenue, improve the business environment, and enhance governance and transparency.
“A comprehensive reform package is crucial to rebuild fiscal buffers, reduce debt vulnerabilities, and create space for increased social spending in areas like health, education, and social protection,” emphasized Ms. Vladkova Hollar.
Egypt’s economy has faced significant challenges, including high debt levels, inflation, and foreign exchange shortages. However, the country has made progress in its economic reforms, securing consecutive bailout deals worth over $60 billion from international partners.
