Egypt commits to zero CBE claims by EGP 100B each FY: IMF

Updated 8/27/2024 7:50:00 AM

Arab Finance: The Egyptian authorities have reduced the Central Bank of Egypt’s (CBE) claims by EGP 150 billion by end-July 2024, committed to further cut them to zero by EGP 100 billion every fiscal year (FY), according to the International Monetary Funds’ (IMF) country report on Egypt.

This could be achieved by developing a detailed repayment strategy that may use operational surpluses acquired by the agencies that received the loans or other mechanisms that should not disrupt regular budgetary operations, the report showed.

The report also revealed that as of May 31st, the balance of the overdraft account at the CBE was zero, well below the quantitative performance criteria (QPC) ceiling.

Furthermore, the Egyptian General Petroleum Corporation (EGPC) set a plan to settle its arrears to international oil corporations, lowering them to around $5 billion, according to the report.

The IMF noted that interest payments increased significantly to 9% of the gross domestic product (GDP) in the first 10 months of FY 2023/24, representing 51% of total expenditure and 84% of total revenues.

“The allocation of windfall revenue to the Ministry of Finance from the sale of development rights in Ras El-Hekma has helped reduce gross financing needs and debt,” the report read.

Additionally, the fund expects an annual inflow of foreign direct investment (FDI) related to Ras El-Hekma development project in the range of $2.5 billion to $5 billion.

However, the IMF recommends implementing a clear transition toward a tax revenue-based consolidation to sustainably increase the primary surplus and create room for priority expenditure.

On the structural front, the country needs to take steps toward improving the governance structure of state-owned banks, continuing to strengthen the competition framework, and automating and modernizing trade facilitation procedures to boost efficiency and remove trade barriers.