The latest disbursement means that the country has received $1.64 billion from the $8 billion loan since the agreement’s approval in 2022.
Emphasizing advancing reforms to boost Egypt’s private sector, the International Monetary Fund (IMF) completed the third review of Egypt’s Extended Fund Facility (EFF) on Monday, opening up $820 million from the $8 billion loan.
Praising the government’s efforts to restore macroeconomic stability, IMF Deputy Managing Director, Antoinette M. Sayeh, stated that “With signs of recovery in sentiment, private sector growth should be poised for a rebound”.
“Strengthened reforms under the EFF-supported program are yielding positive results. The unification of the exchange rate and the accompanying monetary policy tightening have curtailed speculation, brought in foreign inflows, and have moderated price growth,” she explained.
Expected to arrive in Egypt’s central bank within the next couple of days, the latest disbursement means that the country has received $1.64 billion from the $8 billion loan since the agreement’s approval in 2022.
The IMF highlighted that, since the previous disbursements of the EFF, inflationary pressures are easing steadily, Egypt’s foreign currency shortage has been eliminated, and certain key fiscal targets “including those related to spending by large infrastructure projects” have been met.
“These improvements are beginning to affect investor confidence and the private sector's sentiment positively,” the IMF explained.
In its statement, the IMF recommended that Egypt should continue to maintain a flexible exchange rate regime, which allows the Egyptian pound to adjust to market conditions, preventing the build-up of external imbalances.
To maintain a downward trend of inflation, the Central Bank of Egypt is suggested to adopt a data-driven approach to tackle inflation and lower inflation expectations.
The fund added that Egypt should continue its efforts in fiscal consolidation, which refers to the government's actions to reduce its budget deficit and stabilize public debt. Typically, this includes controlling government spending, and improving revenue collection through taxes.
“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 mobilization and contain fiscal risks from the energy sector. This will also assist in generating some fiscal space to expand social spending in support of vulnerable groups,” the IMF wrote.
The IMF urged Egypt to accelerate efforts to implement the State Ownership Policy, including fast-tracking the divestment program which involves reducing the government's ownership stake in state-owned enterprises (SOEs) through privatization or public-private partnerships.
Streamlining business regulations and creating a level playing field for private enterprises are also crucial in enhancing competition and productivity across sectors.
Lastly, the IMF emphasized a focus on strengthening the resilience of the financial sector, enhancing risk management practices, and improving competition within the banking sector.
“Looking ahead, implementation of the structural reform agenda is key to achieving more inclusive and sustainable growth. Reforms that boost tax revenue, deliver a more robust debt management strategy, and bring additional resources from divestment to debt reduction would create space for more productive spending, including additional targeted social spending,” the Deputy Managing Director explained.
Sayeh added that bringing energy prices in line with actual costs, including retail fuel prices by December 2025, is crucial for ensuring a reliable energy supply and balancing the sector.
Improving how state-owned banks are managed, progressing with the state-ownership policy, increasing transparency in government finances, and promoting fair competition are key steps to attract more private investment, she highlighted.
Significant risks remain, she emphasized, and to maintain economic stability, it's crucial to uphold comprehensive macroeconomic policies, such as the flexible exchange rate regime.
Progressing meaningfully with structural reforms would greatly enhance the country’s growth prospects, while careful management of capital inflows is also essential to prevent inflation and limit the risk of future external pressures, the IMF Deputy MD concluded.
