The International Monetary Fund (IMF) said its executive board has completed the fifth review of Egypt’s $12 billion (Dh44bn) loan programme, allowing Cairo to draw another $2bn in funds to help boost North Africa's biggest economy.
The draw down represents the final instalment in a three-year loan programme agreed in 2016 to support Egypt’s economic reforms, the Washington-based lender said in a statement on Wednesday.
“Egypt has successfully completed the three-year arrangement under the Extended Fund Facility and achieved its main objectives,” David Lipton, IMF's acting managing director, said.
“The macroeconomic situation has improved markedly since 2016, supported by the authorities’ strong ownership of their reform programme and decisive upfront policy actions. Critical macroeconomic reforms have been successful in correcting large external and domestic imbalances, achieving macroeconomic stabilisation and a recovery in growth and employment, and putting public debt on a clearly declining trajectory.”
Egypt, the most populous Arab nation, also met its 2018-19 primary surplus target of 2 per cent of the country's gross domestic product, and the IMF noted the importance of maintaining primary surpluses over the medium term to keep public debt on a downward trajectory.
"The elimination of most fuel subsidies, which are regressive, will encourage energy efficiency, help protect the budget from unexpected changes in oil prices, and free up fiscal space for social spending," Mr Lipton said. He added that improved use of revenue was "essential to create room for spending in health, education, and social protection".
Egypt's economic outlook remains favourable and provides an opportune juncture to further advance structural reforms to support more inclusive private-sector led growth and job creation, Mr Lipton said.
Authorities in Cairo, the IMF said, have launched important reforms of competition policy, public procurement, industrial land allocation, and state-owned enterprises. It added that sustained implementation would be essential to ensure that changes achieve meaningful results in the business climate.
“Deepening and broadening of effective reforms is critical to underpin the positive outlook for growth and unemployment.”
The Egyptian economy faced headwinds following prolonged political uncertainty in the country after the removal of former president Hosni Mubarak in 2011, which led to a build-up of macroeconomic imbalances. A significantly overvalued exchange rate undermined competitiveness and depleted foreign exchange reserves. Moreover, weak revenue combined with poorly-targeted subsidies and a growing public sector wage bill resulted in large deficits and high levels of public debt.
The World Bank in a report this year said Egypt’s economic growth averaged 5.3 per cent in its 2017-18 fiscal year — a rate which was sustained through to the first quarter of 2019, driven by expansion in the gas production, tourism, manufacturing, construction and ICT sectors. A pickup in private sector investment and an improvement in net exports also helped to stabilise the country's economy, it noted.