The International Monetary Fund on Wednesday completed its reviews of two Egyptian reform programmes, unlocking about $2.3 billion in funding for Cairo.
The IMF had reached a staff-level agreement on the fifth and sixth reviews of Egypt's economic reform programme and the first review of its Resilience and Sustainability Facility programme in December, which needed to be confirmed by the fund's executive board in Washington.
The IMF said that macroeconomic conditions in Egypt have improved as stabilisation policies were implemented. The fund projected Egypt's real GDP grew at a 4.4 per cent pace in fiscal year 2024-25, while inflation, which had peaked at more than 38 per cent in 2023, had moderated to 11.9 per cent as of January.
“The authorities’ stabilisation measures continue to take effect,” IMF deputy managing director Nigel Clarke said.
The IMF and Egypt agreed to an expanded $8 billion, 46-month loan in 2024 after first agreeing to a programme in 2022. At the time, the Arab world's most populous country was faced with high inflation and a foreign currency reserve shortage.
Significant investment pledges from the UAE, as well as capital injections from the World Bank and Europe that year, had also helped to prevent an economic crisis in the country.
In its latest monetary policy report, the Central Bank of Egypt said it expects to see a “cautiously improving macroeconomic outlook” with inflation projected to ease in the short-term.
The IMF said Egypt's progress on implementing structural reforms has been uneven, with authorities making slower-than-expected advances on reducing the state's footprint. High public debt and elevated gross financing needs are also weighing on its medium-term growth prospects, the fund said.
The IMF said that the path forwards is for Egypt's economy to transition to one that is sustainable and led by the private sector.
It added that downside risks “remain significant” with geopolitical tension still gripping the region.
Gulf investment also continues, and mega-projects backed by Egypt's regional partners pose upside risks to projections.
In November, Qatari Diar, the real estate arm of Doha's sovereign wealth fund, said it would invest $29.7 billion to develop a luxury coastal development on Egypt's Mediterranean shore. That investment pledge was part of a broader $7.5 billion investment package announced earlier last year.
Cairo also opened the Grand Egyptian Museum, a sprawling new site dedicated to its ancient civilisation, as Egypt seeks to boost its tourism numbers.
The IMF said strong remittances and tourism receipts have reflected in the current account, with the deficit narrowing to 4.2 per cent of GDP. Foreign direct investment inflows and non-resident inflows into domestic debt markets have shown evidence that market confidence is growing.
However the fund continued to press Egypt to make more reforms on divestment in non-strategic sectors and debt management.
“Further progress in these areas will be essential to crowd in private investment, reduce financing needs, and generate more inclusive and sustained growth over the medium term,” Mr Clarke said.
Mr Clarke also said key priorities to strengthen fiscal sustainability include broadening the tax base and shoring up tax compliance. He urged Egypt to maintain its flexible exchange rate regime to prevent external imbalances from returning.
Egypt's 46-month loan programme runs until December 15.
