## Press Release: IMF Approves 24-month Stand-By Credit for Egypt

_IMF News, October 11, 1996_

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## Bibliographic details
- Published: October 11, 1996

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### Approval and key financial terms
- The International Monetary Fund (IMF) approved a 24-month stand-by credit for Egypt equivalent to SDR 271.4 million (about US$391 million).
- In view of Egypt's present strong international reserve position, the Government does not intend to draw on the stand-by credit.
- Egypt's quota in the IMF is SDR 678.4 million (about US$976 million); its outstanding use of IMF credit currently totals SDR 16.35 million (about US$24 million).

### Background and recent macroeconomic performance
- Since 1991, Egypt implemented wide-ranging macroeconomic stabilization and structural reform measures, supported by two successive IMF credits.
- Real GDP growth accelerated to over 4 percent in 1995/96 from virtual stagnation in 1991/92.
- The rate of inflation declined to 7 percent from over 21 percent.
- The overall balance of payments remained in surplus, with net international reserves currently equivalent to about 17 months of imports.
- External debt dynamics:
  - Ratio of external debt to GDP fell to 47 percent in mid-1996 from about 75 percent in 1991/92.
  - Debt service ratio declined to about 11 percent of current account receipts (excluding official transfers) from 14 percent in 1991/92.
- Performance under the three-year program supported by the 1993 credit fell short of Egypt's potential, particularly on structural reforms.

### Medium-Term Strategy and the 1996-98 Program (objectives and fiscal stance)
- Principal medium-term challenge: increase economic growth to create employment for a rapidly growing population and raise living standards.
- Program focus: consolidate macroeconomic stabilization gains and broaden structural reform agenda (privatization, deregulation, trade liberalization, fiscal and financial sector reform).
- Program targets for 1996-98:
  - Real GDP growth: further increase to about 5 percent in 1997/98.
  - Inflation: further decrease to about 6 percent.
  - External position: maintain a viable external position; external current account projected to shift from approximate balance in 1995/96 to a deficit of about 1 percent of GDP in each program year.
  - Employment: increase in growth rate expected to create some 400,000 new jobs a year.
  - Investment and savings: rise of about 2.5 percentage points relative to GDP over the program period.
- Fiscal target for 1996/97:
  - Overall budget deficit will be reduced to 1.1 percent of GDP, excluding privatization receipts and any further debt relief.
- Demand management: other demand management policy elements will continue to be restrained to reduce inflation and maintain a sound external position.

### Structural reforms (measures and objectives)
- Central goal: fundamental change in ownership structure to expand the private sector (public enterprises account for about one-third of manufacturing, half of investment expenditure, and about 15 percent of total employment).
- Planned measures over the next two years:
  - Significant divesture of nonfinancial public sector enterprises.
  - Further liberalization of international trade, including further tariff reductions and elimination of quantitative restrictions.
  - Fiscal revenue reforms:
    - Transformation of the general sales tax into a value-added tax (VAT).
    - Rationalization of the income tax to make it simpler, broader based, more transparent and equitable.
  - Medium-term program to improve the civil service.
  - Acceleration of financial sector reform, including privatization of banks and insurance companies, and further strengthening of banking supervision.
  - Administrative reforms to reduce bureaucracy and red tape, including preparation of a unified investment law to simplify investment regulations.

### Addressing social needs
- Government commitments:
  - Improve health and education systems by increasing the number of qualified personnel such as nurses and teachers.
  - Meet these needs within a comprehensive civil service reform program aimed at eliminating bureaucratic impediments, improving government service efficiency, and building a cadre of well-paid and efficient civil servants.
  - Strengthen the social safety net while improving its targeting.
- External support:
  - Foreign donors are increasing support of the Social Fund for Development to facilitate assistance to displaced workers through compensation pay, retraining, and redeployment.

### The challenge ahead
- The juncture is seen as propitious for a reinvigorated economic reform program.
- Continued structural reforms are necessary for Egypt to meet new international challenges and exploit its considerable potential.

### Egypt: Selected Economic Indicators (values as presented)
- Real GDP growth (Percent change):
  - 1991/92: 0.3
  - 1992/93: 0.5
  - 1993/94: 2.9
  - 1994/95: 3.2
  - 1995/96*: 4.2
  - 1996/97**: 4.5
- Consumer prices (end of period) (Percent change):
  - 1991/92: 21.1
  - 1992/93: 11.1
  - 1993/94: 9.0
  - 1994/95: 9.4
  - 1995/96*: 7.1
  - 1996/97**: 6.2
- Overall fiscal balance (deficit-) (excluding official grants) (Percent of GDP):
  - 1991/92: -5.0
  - 1992/93: -3.5
  - 1993/94: -2.1
  - 1994/95: -1.3
  - 1995/96*: -1.1
- External current account balance (deficit-) (Including official transfers) (Percent of GDP):
  - 1991/92: 8.8
  - 1992/93: 5.6
  - 1993/94: 0.4
  - 1994/95: 2.7
  - 1995/96*: 0.2

*Preliminary.
**Program.
Sources: The Egyptian authorities; and IMF staff estimates.

*Press Release No. 96/50 — IMF EXTERNAL RELATIONS DEPARTMENT, October 11, 1996.*

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## References

- [Arab Republic of Egypt and the IMF](http://www.imf.org/external/country/EGY/index.htm)
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- [PRESS CENTER](http://presscenter.imf.org/)
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_Source: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9650_