In a long-awaited move, the Executive Board of the International Monetary Fund (IMF) formally approved the fifth and sixth reviews of Egypt's economic reform program, paving the way for immediate cash inflows of approximately $2.3 billion to the Egyptian treasury. This step is expected to bolster macroeconomic stability as the Egyptian government seeks to consolidate the gains of recent reforms.
Details of the new financing and dollar liquidity support
Under this decision, Egypt is entitled to draw approximately $2 billion (equivalent to 1.5 billion Special Drawing Rights) from the Extended Fund Facility, in addition to a new tranche of $273 million from the Resilience and Sustainability Program. This financial injection has more than just a limited impact; it represents an international vote of confidence that opens the door to further investment flows and financing from international partners such as the European Union and the World Bank, thus bolstering the country's foreign exchange reserves.
Economic context and program expansion
To understand the significance of this decision, one must go back to March 2024, when the IMF approved increasing its loan to Egypt from $3 billion to $8 billion. This expansion came in response to the severe economic challenges posed by geopolitical tensions in the region, including the war in Gaza and its direct impact on Suez Canal revenues and the tourism sector. This period coincided with decisive measures taken by the Central Bank of Egypt to float the Egyptian pound in order to eliminate the parallel market, a move the IMF considered pivotal for restoring economic stability.
Fund notes: Macroeconomic stability and structural slowdown
Despite praising the stability of macroeconomic indicators, the IMF statement noted a disparity in the pace of structural reforms. The statement explained that efforts to reduce state involvement in the economy and create more space for the private sector are proceeding more slowly than planned. The IMF consistently emphasizes the need to implement the State Ownership Policy Document and accelerate the government's privatization program to enhance competition and attract foreign direct investment, particularly given the high levels of public debt and the urgent need to expand fiscal space.
Future prospects and the impact of the decision
The completion of these two reviews sends a reassuring message to international markets and credit rating agencies, confirming Egypt's commitment to its fiscal and monetary reform path. This financing is expected to help alleviate inflationary pressures and support exchange rate stability. With only two reviews remaining to conclude the current program by the end of the year, Egypt enters a critical phase that requires accelerating the pace of structural reforms to ensure sustainable economic growth and improve citizens' living standards in the medium term.
