Egypt: IMF Reaches Staff-Level Agreement on a Three-Year US$12 Billion Extended Fund Facility

IMF News, August 11, 2016

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Canonical URL: Egypt: IMF Reaches Staff-Level Agreement on a Three-Year US$12 Billion Extended Fund Facility

Mission led by Mr. Chris Jarvis visited Cairo from July 30 to August 11, 2016.
Staff-level agreement reached on a three-year Extended Fund Facility (EFF) in the amount of SDR 8.5966 billion (422 percent of quota or about US$12 billion).
Staff-level agreement is subject to approval by the IMF’s Executive Board, which is expected to consider Egypt’s request in the coming weeks.
Press release date: August 11, 2016.
IMF Communications Department media contact: PRESS OFFICER: Randa Mohamed Elnagar; Phone: +1 202 623-7100; Email: MEDIA@IMF.org.

The EFF supports the authorities’ comprehensive economic reform program as approved by the parliament.
Program aims:
- Improve the functioning of the foreign exchange markets.
- Bring down the budget deficit and government debt.
- Raise growth and create jobs, especially for women and young people.
- Strengthen the social safety net to protect the poor and vulnerable groups. Social protection is described as a cornerstone in the program.

Fiscal anchor: place public debt on a clearly declining path toward more sustainable levels.
Projected general government debt trajectory over the program period:
- Decline from about 98% in 15/16 to about 88% of GDP in 2018/19.
Policy measures to achieve fiscal consolidation:
- Raise revenue and rationalize spending to reduce the deficit and free up public funds for high-priority spending (infrastructure, health, education, social protection).
- Adopt the VAT law after approval by the parliament (as indicated in the budget approved by the parliament).
- Continue the program begun in 2014 to rationalize energy subsidies.
- Advance the structural reform agenda to increase investment and strengthen the role of the private sector.

Social protection measures will be prioritized and financed in part by budgetary savings from other measures.
Specific social protection commitments include:
- Preserve or increase support for insurance and medicine for the poor.
- Preserve or increase subsidies for infant milk and medicine for children.
- Provide health insurance for young children and female primary providers.
- Provide targeted social transfers.
- Expand vocational training for youth.
- Develop a plan to enhance the school meals program.
Priority will also be given to investment in public infrastructure.

CBE monetary and exchange rate policy objectives:
- Improve the functioning of the foreign exchange market.
- Increase foreign reserves.
- Bring down inflation to single digits during the program.
Policy orientation:
- Move to a flexible exchange rate regime to strengthen competitiveness, support exports and tourism, and attract foreign direct investment.
- Expected outcomes: foster growth and jobs and reduce financing needs.
Financial sector policies aimed at safeguarding the strength and stability of the banking system.

Structural reforms will target:
- Improving the business environment.
- Deepening labor markets.
- Simplifying regulations.
- Promoting competition.
Ambition: significantly improve Egypt’s ratings in Doing Business and Global Competitiveness.
Public financial management and fiscal transparency will be strengthened to improve governance, delivery of public services, enhance accountability, and combat corruption.

IMF stands ready to partner with Egypt in implementing the program and will encourage other multilateral agencies and countries to support Egypt.
Consultations with World Bank and African Development Bank indicate willingness to help.
The statement notes it would be helpful for Egypt’s bilateral partners to step forward at this critical time.

“I am pleased to announce that, in support of the government’s economic reform program, the Egyptian government, the Central Bank of Egypt (CBE) and the IMF team have reached a staff-level agreement on a three-year Extended Fund Facility (EFF) in the amount of SDR 8.5966 billion (422 percent of quota or about US$12 billion).”
“Egypt is a strong country with great potential but it has some problems that need to be fixed urgently.”
“Social protection is a cornerstone in the government’s reform program.”
“With the implementation of the government reform program, together with the help of Egypt’s friends, the Egyptian economy will return to its full potential. This will help achieve inclusive job-rich growth and raise living standards for the Egyptian people.”

International Monetary Fund — End-of-Mission staff statement (August 11, 2016).