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Egypt is slated to get a fresh USD 820 tranche from the IMF within weeks: The International Monetary Fund has reached a staff-level agreement with Egypt on the third review of its expanded USD 8 bn loan program, which is set to unlock USD 820 mn after the Fund’s executive board gives the go-ahead “in the coming weeks,” the Fund said in a statement.
Remember: A second IMF tranche of USD 820 mn reportedly entered the state’s coffers in April, nearly a month after the IMF’s executive board signed off on a USD 5 bn extension for the facility and completed its long-delayed first and second reviews. An initial tranche of USD 347 mn was dispersed in December 2022.
THE KEY TAKEAWAYS FROM THE REVIEW-
Structural reforms had a noticeable impact on the economy: The IMF mission — which visited Cairo between 12-26 May — pointed to Egypt’s resilience despite the surrounding geopolitical challenges, with the mission’s Head Vladkova Hollar saying that the country “stayed the course to preserve macroeconomic stability through fiscal discipline, tight monetary policy, and a shift to a flexible exchange rate regime,” all of which have helped boost FX availability, cool off inflation, and prompt recovery in the private sector.
But risks loom large: The Fund warned that the impact of the war on Gaza and trade disruptions in the Red Sea could pose a threat to the country’s economic outlook. This, coupled with domestic structural challenges, means that the government will have to stick to its reform agenda developed with the IMF to maintain and develop the progress it has made, Hollar said.
Prudence is key: If the government is able to meet its primary balance targets, this should help reduce debt sustainability risks, Hollar argues. The government should also work to up domestic revenues so it can spend more on education, healthcare, and social programs.
The privatization program will support debt management: The privatization of state-owned companies and assets will further support debt management and is expected to “improve efficiency and attract new investment, while generating additional resources for the treasury,” Hollar said. Hollar also called for state-owned energy companies to work towards “gradually” balancing their books.
Inflation is still firmly in the sights of the Fund: The Fund kept up its calls for us to keep working towards becoming an “inflation-targeting regime” by calling for monetary policy to be kept tight to keep inflation falling to the central bank’s target.
ICYMI: Negotiations are also underway for Egypt to access an additional; USD 1.2 bn in long-term, low-cost climate financing from the IMF's Resilience and Sustainability Facility.
