IMF Executive Board Approves 46-month US$3 billion Extended Arrangement for Egypt

IMF News, December 16, 2022

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Canonical URL: IMF Executive Board Approves 46-month US$3 billion Extended Arrangement for Egypt

The Executive Board approved a 46-month arrangement under the Extended Fund Facility (EFF) for Egypt in an amount of SDR 2,350.17 million (equivalent to 115.4 percent of quota or about US$3 billion).
The decision enables an immediate disbursement of SDR 261.13 million (equivalent to about US$ 347 million) to help meet the balance of payments need and provide support to the budget.
Over the course of the program, the EFF is expected to catalyze additional financing of about US$14 billion from Egypt’s international and regional partners, including new financing from GCC countries and other partners through the ongoing divestment of state-owned assets as well as traditional forms of financing from multilateral and bilateral creditors.

Permanent shift to a flexible exchange rate regime to increase resilience against external shocks and to rebuild external buffers.
Monetary policy aimed at gradually reducing inflation in line with the central bank’s targets together with strengthening policy transmission, including by transitioning away from subsidizing lending schemes.
Fiscal consolidation and debt management to ensure downward trajectory in public-debt-to-GDP and contain gross financing needs, while increasing social spending and strengthening social safety net to protect the vulnerable, and managing national investment projects in a manner consistent with external sustainability and economic stability.
Wide-ranging structural reforms to reduce the state footprint, level the playing field across all economic agents, facilitate private-sector-led growth, and strengthen governance and transparency in the public sector.

The authorities have requested access under the Resilience and Sustainability Facility (RSF), which could provide up to an additional SDR 1 billion to support climate-related policy goals.
Discussions on RSF access are expected to take place in the context of future EFF reviews.

The EFF-supported program is presented as a comprehensive policy package to preserve macroeconomic stability, restore buffers, and pave the way for sustainable, inclusive, and private-sector-led growth.
The EFF is expected to catalyze additional financing from Egypt’s international and regional partners, including financing in the form of investments.

Objectives outlined by Ms. Kristalina Georgieva:
- Reduce imbalances, maintain macroeconomic stability, restore buffers, and improve resilience against shocks.
- Pave the way for private-sector-led growth through structural reforms that reduce the state footprint and strengthen governance and transparency.
- Allow monetary policy to focus on maintaining price stability following a permanent shift to a flexible exchange rate regime.
- Ensure medium-term debt sustainability through fiscal consolidation while expanding social spending to alleviate poverty and protect the vulnerable.
Risks and contextual factors highlighted:
- Pre-existing vulnerabilities included a stable exchange rate, high public debt, and delayed structural reforms, exacerbated by Russia’s war in Ukraine which triggered capital outflows, reduced the central bank’s foreign reserves and banks’ net foreign assets, and widened the exchange rate misalignment.
- Given heightened uncertainty and risks to the global economic outlook, commitment to exchange rate flexibility, prudent macroeconomic policies, and structural reforms is critical.
Conditions for success:
- Strong ownership, track record under previous Fund-supported programs, and political support for the policy package are important risk mitigating factors.
- The EFF will fill part of the financing gap, unlocking substantial additional financing from Egypt’s partners, including financing in the form of investments.

Arrangement duration: 46-month.
EFF amount: SDR 2,350.17 million (equivalent to 115.4 percent of quota or about US$3 billion).
Immediate disbursement: SDR 261.13 million (equivalent to about US$ 347 million).
Expected additional financing catalyzed: about US$14 billion.
Potential RSF support: up to SDR 1 billion.

IMF Press Release No. 22/441 — December 16, 2022 — IMF Communications Department