IMF, Egypt conclude staff-level agreement on 4th EFF review
Updated 12/25/2024 7:41:00 AM
Arab Finance: The International Monetary Fund (IMF) and the Egyptian government have reached a staff-level agreement on the fourth review of the Extended Fund Facility (EFF), according to a statement from Ivanna Vladkova Hollar, head of the IMF mission to Egypt.
The agreement, subject to approval by the IMF Executive Board, will provide Egypt with access to approximately $1.2 billion.
The agreement follows in-person discussions from November 6 to 20 and virtually thereafter.
Despite facing external and domestic economic challenges, Egyptian authorities have continued implementing key policies to maintain macroeconomic stability.
Given the difficult external environment and a challenging domestic economic landscape, Egypt has recalibrated its medium-term fiscal commitments.
The government plans to achieve a primary balance surplus of 4% of gross domestic product (GDP) in the next fiscal year (FY) 2025/2026, slightly below earlier commitments.
This will rise to 5% in FY 2026/2027.
This recalibration is aimed at creating fiscal space to expand critical social programs supporting vulnerable groups and the middle class while ensuring debt sustainability.
However, sustained fiscal consolidation remains necessary to reduce debt vulnerabilities, high interest costs, and financing requirements.
Key focus areas include managing fiscal risks from state-owned enterprises (SOEs) in the energy sector and strictly enforcing public investment ceilings.
Authorities are also pursuing tax system reforms to increase revenue without raising tax rates, aiming to boost the tax-to-GDP ratio by 2% over the next two years by eliminating exemptions.
The IMF and Egyptian authorities emphasized the need for comprehensive reforms to rebuild fiscal buffers, address debt vulnerabilities, and expand social spending in health, education, and social protection to enhance economic resilience.
Efforts to improve the business environment and position the private sector as the primary driver of growth are being accelerated.
This includes leveling the playing field, reducing the state's economic footprint, and instilling confidence among private investors to attract foreign investment.
The divestment program, viewed as critical to reducing Egypt’s high debt burden and fostering private sector development, is also set to be expedited
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