The World Bank announced on Monday, $700 million in budget support for Egypt. This is part of a 3-year, $6 billion program that the bank pledged earlier this year amid a surge of foreign financing for the indebted North African country.
The $700 million is intended to help Egypt boost private sector participation, strengthen macroeconomic and fiscal resilience, and put the country on a greener growth trajectory, according to the World Bank’s statement.
IMF reaches staff-level agreement on loan program review
Earlier in June, the International Monetary Fund (IMF) reached a staff-level agreement with Egypt on the third review of an expanded IMF loan program. This will give Egypt access to $820 million upon approval from the IMF’s executive board. The agreement follows the IMF’s recent mission to assess Egypt’s reform performance under an extended fund facility loan, which was expanded to $8 billion in March from an original $3 billion loan in December 2022.
Improved financing conditions and investment deal
Since Egypt floated its currency exchange rate in March, financing conditions have improved. Additionally, the recent Ras Al Hekma investment deal has positively impacted the country’s economic development.
Potential for additional IMF funding
Further discussions within the IMF program may lead to additional funding through the resilience and sustainability facility, contingent upon Egypt’s commitment to addressing climate change and implementing robust environmental policies.
Inflation and subsidy reforms
Egypt continues to grapple with high inflation rates, though the IMF expects inflation to fall to 15.25 percent from the current 35 percent by the end of the year. Regarding the country’s budget, the IMF suggests that Egypt needs to replace untargeted fuel subsidies with targeted spending to ensure support reaches households in need.
Economic outlook and drivers of growth
According to the latest World Bank Global Economic Prospects report, Egypt’s economy is expected to expand by 4.2 percent in 2024 and 4.6 percent in 2025-2026. However, the report expects growth in Egypt to slow in 2023-2024 (July 2023 to June 2024) to 2.8 percent due to the impact of regional tensions on shipping through the Suez Canal and the tourism sector.
The World Bank attributes Egypt’s economic expansion in 2024 to several factors, including the rise in investments, particularly in the Ras El Hekma project with the UAE. Additionally, the bank expects private consumption to expand due to the recovery in remittances and the decline in inflation. Exchange rate depreciation will also further boost Egypt’s net exports and overall economy.
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