IMF unlocks $2.5 billion for Egypt after loan review

The International Monetary Fund (IMF) has completed its fourth review of Egypt's economic reform program and approved the disbursement of $1.2 billion to Egypt. This disbursement aims to support Egypt's economic stability and structural reforms, providing much-needed financial assistance.

The IMF's Executive Board also approved Egypt's loan application under the Resilience and Sustainability Facility, with a loan amount of approximately $1.3 billion. This facility is designed to help member countries address climate change and other long-term challenges, promoting sustainable growth.

The latest disbursement brings Egypt's total purchases under the Extended Fund Facility (EFF) program to approximately $3.207 billion, representing 119% of quota. Egypt was approved for a 46-month extended fund facility arrangement on December 16, 2022, to bolster its economic reforms.

Despite a sharp decline in Suez Canal revenue due to ongoing regional tensions, Egyptian authorities are continuing to implement key policies to maintain macroeconomic stability. While economic growth slowed to 2.4% in fiscal year 2023-24, down from 3.8% in the previous fiscal year, it has rebounded to approximately 3.5% (year-on-year) in the first quarter of this fiscal year (2024-25).

The IMF stated, "Given the difficult external environment and the challenging domestic economic environment, the IMF Executive Board approved the Egyptian authorities' request to adjust the medium-term fiscal commitments. In particular, the underlying primary surplus (excluding divestment proceeds) is expected to reach 4 percent of GDP in the next fiscal year (2025-26) (0.5 percentage points of GDP less than the earlier program commitment) and then increase to 5 percent of GDP in fiscal year 2026-27 (in line with the earlier commitment)."

The IMF added that the external environment is expected to remain challenging, as successive external shocks persist. "The ongoing war in Sudan has triggered a large influx of refugees, while the trade disruptions in the Red Sea since December 2023 have reduced foreign exchange revenues from the Suez Canal by $6 billion in 2024. At the same time, remittances from Egyptian workers abroad and tourism revenues remain strong."

At the conclusion of the Executive Board's discussion, Deputy Managing Director and Chair Nigel Clarke stated, "Since March 2024, despite a challenging external environment, including persistent external shocks, including regional conflicts and Red Sea trade disruptions, the Egyptian authorities have made significant progress in stabilizing the economy and restoring market confidence."