IMF backs Egypt with fourth review under $8 billion loan program

The International Monetary Fund (IMF) announced on Wednesday that it has reached a staff-level agreement with Egypt for the fourth review under its Extended Fund Facility (EFF) arrangement. 

This agreement could lead to a $1.2 billion disbursement under the program, providing much-needed financial support to Egypt's struggling economy.

Egypt, currently facing soaring inflation and persistent foreign currency shortages, entered into the $8 billion, 46-month EFF agreement in March 2024. 

The economic challenges have been exacerbated by a significant decline in revenue from the Suez Canal, driven by heightened regional tensions over the past year. These factors have added pressure to an economy already grappling with structural vulnerabilities.

As part of the agreement, Egypt has committed to increasing its tax-to-revenue ratio by 2% of its gross domestic product (GDP) over the next two years. The focus will be on reducing tax exemptions rather than increasing tax rates, ensuring fairness and efficiency in revenue collection.

The IMF highlighted that this reform would create fiscal space for increased social spending, which is crucial for supporting Egypt’s vulnerable populations amidst economic hardship.

"While the authorities' plans to streamline and simplify the tax system are commendable, further reforms will be needed to enhance domestic revenue mobilization efforts," the IMF stated.

Support for Economic Recovery

The potential disbursement of $1.2 billion under the current agreement would provide a critical boost to Egypt’s financial stability. The IMF’s support is aimed at helping Egypt navigate its economic challenges while laying the groundwork for sustainable recovery and growth.

The Extended Fund Facility has been instrumental in guiding Egypt’s fiscal and structural reforms, including efforts to stabilize the currency, improve tax systems, and enhance public financial management.

The IMF’s engagement with Egypt underscores the importance of addressing both immediate and long-term economic challenges. 

The forthcoming disbursement will not only provide liquidity but also reinforce Egypt’s commitment to reform, ensuring that fiscal policies are aligned with inclusive growth and resilience against future shocks.

As Egypt progresses with its reform agenda, international support from the IMF and other stakeholders will remain vital in addressing structural challenges and fostering economic stability.