The International Monetary Fund (IMF) has reached a staff-level agreement with Egypt on the third review of an expanded IMF loan program, which will give Egypt access to $820 million upon approval from the IMF’s executive board. The agreement follows the IMF’s recent mission to review Egypt’s reform performance under an extended fund facility loan which it expanded to $8 billion in March from an original $3 billion loan in December 2022.
“While geopolitical tensions and their impact on Egypt remain challenging, the authorities have stayed the course to preserve macroeconomic stability through fiscal discipline, tight monetary policy, and a shift to a flexible exchange rate regime,” IMF’s mission chief Vladkova Hollar stated.
These efforts have raised Egypt’s outlook, improved FX availability, slowed down inflation, and contributed to the recovery of the private sector’s sentiment. However, the IMF noted some downside risks surrounding the economic outlook, including spillovers from regional tensions and trade disruptions in the Red Sea, which have been negatively influencing Suez Canal receipts.
The IMF also noted that “the authorities and the mission agreed that monetary policy conditions need to remain tight in the short term to help bring inflation toward the CBE target”.
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Since Egypt floated in currency exchange rate in March, financing conditions have improved. In addition, the recent Ras Al Hekma investment deal has positively impacted economic development.
“Considering the sizeable potential capital inflows, proper management will be critical to avoid any disruptive macroeconomic challenges that could undermine the authorities’ objective to diversify the Egyptian economy and achieve more inclusive growth,” Hollar added.
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