The International Monetary Fund has approved a fresh disbursement of $820m to Egypt after IMF’s Executive Board completed the third review under the $8bn loan programme.
The decision, announced on Monday, follows a positive assessment of the country’s economic performance since the programme began in December 2022.
The IMF’s Executive Board completed the third review of Egypt’s 46-month Extended Fund Facility (EFF) arrangement.
“Strengthened reforms under the EFF-supported programme are yielding positive results,” said Antoinette M. Sayeh, Deputy Managing Director and Acting Chair. “The unification of the exchange rate and the accompanying monetary policy tightening have curtailed speculation, brought in foreign inflows, and have moderated price growth. With signs of recovery in sentiment, private sector growth should be poised for a rebound.”
The lender praised Egypt’s progress in tackling inflation, addressing foreign exchange shortages, and meeting fiscal targets, including those related to large infrastructure projects. These achievements have helped boost investor confidence and improve business sentiment.
However, the IMF warned of challenges posed by the regional conflict in Gaza and Israel, as well as domestic policy issues. It stressed the importance of maintaining a flexible exchange rate, taming inflation, and continuing fiscal consolidation efforts.
“Ongoing fiscal consolidation efforts will help place public debt on a decisive downward path,” the IMF said. “To ensure that resources are still available to meet vital spending needs to help Egyptian families, including on health and education, particular attention will be needed to strengthen domestic revenue mobilisation and contain fiscal risks from the energy sector.”
The IMF also urged Egypt to accelerate the privatisation of state-owned enterprises, streamline business regulations, and improve the overall business environment. Strengthening the financial sector and promoting competition in the banking industry were also highlighted as key priorities.
“These measures are crucial for steering Egypt toward private-sector-led growth that can generate jobs and opportunities for everyone,” the IMF said.
Despite the progress made, the IMF cautioned that risks remain, including the ongoing regional conflicts and potential capital inflows. It emphasised the need for continued vigilance and adherence to the reform programme.
The North African nation has embarked on a series of austerity measures to meet the IMF’s conditions, including aggressive interest rate hikes, currency devaluation, and fuel price increases.
The Central Bank of Egypt (CBE) has raised interest rates by 19% since March 2022, while the Egyptian pound has depreciated by over 223% against the US dollar during the same period.
These measures, coupled with other reforms, have contributed to a gradual decline in inflation, which stood at slightly over 27% in June. However, Prime Minister Mostafa Madbouly has set an even more ambitious target of taming inflation to 10% by 2025.
The government has also implemented a series of fuel price hikes, with the latest round increasing prices by 10-15% on Thursday. Officials have indicated that further price adjustments for goods and services are planned through the end of2025.
Beyond monetary policy and price adjustments, the IMF review will assess Egypt’s progress on fiscal consolidation, debt reduction, and privatization. The government aims to narrow the budget deficit, reduce public debt, and divest state-owned assets.
