Egypt’s fourth loan review showed that more needs to be done on the structural reform agenda. “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,” the IMF said in a statement after its Executive Board completed the fourth review.

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Not the first time we hear of this: The two sides had previously agreed that more needs to be done to accelerate the privatization program. And while we kicked in 2025 with big privatization aspirations after Prime Minister Moustafa Madbouly announced that the government is planning to offer up stakes in ten state-owned companies throughout the year, we are yet to see any of that materialize.

It’s not all bad: “The authorities have taken more decisive action this year with the implementation of a number of critical structural reforms, including through steps to enhance the operational independence of the Egyptian Competition Authority (ECA), with a view to improving competition in product and service markets, and selecting an international consulting company to prepare a study on governance practices related to public banks to increase financial sector efficiency and transparency,” the statement read.

ICYMI- The Board completed the fourth review of Egypt’s USD 8 bn program earlier this week, allowing for the disbursement of USD 1.2 bn — the biggest tranche of the program so far.

We’ll see the money very soon: IMF executive director and former finance minister Mohamed Maait told local news that we can expect the funds to land in state coffers within days.

REFRESHER- The Fund completed its third review of the country’s loan program in late July and the USD 820 mn tranche landed in state coffers just days later. Egypt received its second USD 820 mn tranche in April shortly 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.

Where does that leave the program? With this latest disbursement, Egypt will have received a little over USD 3.2 bn from the USD 8 bn.

Our request for some leniency was also okayed by the board: The Board also approved “the authorities’ request for waivers of nonobservance and modification of performance criteria” and their requested to “recalibrate [their] medium-term fiscal commitments.” The two sides had agreed to “recalibrate the fiscal consolidation path to create fiscal space for critical social programs” when they signed the staff-level agreement back in December.

What does this entail? The primary balance surplus is now expected to hit 4% of GDP next fiscal year, down 0.5 percentage points from previous commitments. The figure is expected to reach 5% of GDP in the fiscal year 2026-2027.

Falling off track: “Progress toward fiscal consolidation in the first half of FY 2024-25 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 statement read.

And external challenges beyond our control aren’t helping, the Fund says, pointing to Red Sea trade disruptions and the war in Sudan and what it resulted in from an influx of refugees.

We’re also making progress maintaining macroeconomic stability, the Fund said, referring to the country’s growth and primary fiscal balance despite regional tensions that have hurt revenues from the Suez Canal.

But we still have ways to go: “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,” the statement said referring to the float of the EGP.

MAAIT LETS US IN ON THE DETAILS OF THE CLIMATE FINANCING-

We have an idea of what projects could receive financing: The USD 1.3 bn in funds we secured under the under the Resilience and Sustainability Facility are set to be directed towards climate-related projects in Egypt — namely ones that pertain to the expansion of renewable energy, emission reduction, water, and combating desertification, Maait told EnterpriseAM. “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,” the IMF said in its statement.

The sizes of the tranches, as well as the disbursement and repayment mechanisms, remain unknown, Maait told us, adding that they will be determined with the Egyptian government at a later stage.

More green financing in the pipeline? The Finance Ministry has been planning to issue USD 1-1.5 bn worth of eurobonds or green bonds in international markets, followed by an issuance of sovereign sukuk, to take advantage of rising investor interest in Egyptian debt, a senior government official told EnterpriseAM back in January. The Madbouly government has been holding discussions with international offering advisors to identify the best options for debt issuances in the coming period, the source added.

The news received a lot of ink in the international pages: Reuters | Bloomberg | TheNational.

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