IMF

The Executive Board of the International Monetary Fund (IMF) completed the first and second reviews of Egypt’s Extended Fund Facility arrangement on Friday March 29, 2024, and approved an augmentation of the original program by about US$5 billion (SDR 3.76 billion). 

“On Friday, March 29th, the IMF Executive Board completed the first and second reviews of the Extended Fund Facility for Egypt and approved an augmentation of the original program by about $5 billion to $8 billion in total. This decision allows the authorities to immediately draw the equivalent of about $820 million. The Egyptian authorities have put together a strong economic stabilization plan to correct imbalances, some elements of which plan are already under implementation. This economic stabilization plan is centered on a liberalized foreign exchange system in the context of a flexible exchange rate regime, a significant tightening of both fiscal and monetary policy to support the adjustment in the exchange rate, a reduction in public investment broadly defined, and the implementation of reforms that would allow the private sector to become the engine of growth,” said Ivanna Vladkova Holler, IMF’s Mission Chief to Egypt. 

Macroeconomic conditions since the approval of the program have been challenging, with rising inflation, foreign exchange shortages and elevated debt levels and financing needs. The authorities have significantly strengthened the reform package underlying the Extended Fund Facility arrangement, supported by an augmentation of access. Recent measures toward correcting macroeconomic imbalances, including unification of the exchange rate, clearance of the foreign exchange demand backlog, and significant tightening of monetary and fiscal policies, were difficult, but critical steps forward. 

“On exchange rate policy and the normalization of access to FX and the functioning of the FX market in such a way that, the price of foreign exchange is determined on the basis of market conditions and available to private sector firms and to individuals. This is an important reform that needs to be sustained. It’s not a one-off reform. It’s important for a liberalized foreign exchange system in the context of a flexible exchange rate to continue and therefore, going forward, at each individual review, the expectation is that the conditions that we’re seeing now in the market, are going to continue to hold in the sense that we will not see a return to a system of FX rationing and lack of FX availability,” added Hollar. 

The Egyptian authorities requested a Resilience and Sustainability Facility arrangement from the IMF. The IMF team will start the 3rd EFF program review and RSF arrangement discussions with the authorities in the next three months. 

“Egypt has indeed requested access under this long-term facility to address climate policies. And as a reminder, in order to proceed with and qualify for access under the RSF, member countries need to have in place a strong set of policies that, are intended to address the risks from climate change. We expect to start discussing these policies with the authorities at the time alongside of the third review, which, as we’ve discussed, will happen, in the next three months. And, of course, just like any other program approval the authorities request will be subject to approval by the executive Board,” said Hollar. 

To watch the full press briefing, click here. You can also read the press release here.