## Egypt—IMF Executive Board Completes Fourth Review under the Extended Fund Facility (EFF)

_IMF News, February 5, 2019_

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## Bibliographic details
- Published: February 5, 2019

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### Macroeconomic outlook and recent developments
- Macroeconomic outlook remains favorable, supported by strong policy implementation.
- Robust growth and a narrowing of the current account deficit reflect a rebound in tourism and strong remittances.
- Unemployment has declined to its lowest level since 2011.
- Recent pick-up in headline inflation reflected temporary increases in food and energy prices; a restrictive monetary policy stance has helped to reverse the increase and keep core inflation well anchored.
- A more difficult external environment poses new challenges as global financial conditions have tightened; Egypt has successfully weathered recent capital outflows, but consistent policy implementation is essential to further strengthen policy buffers, including by containing inflation, enhancing exchange rate flexibility, and reducing public debt.
- Authorities have taken steps to deepen the foreign exchange market and allow greater exchange rate flexibility, including by eliminating the repatriation mechanism.

### IMF decision, financing, and EFF arrangement
- On February 4, 2019, the Executive Board completed the fourth review of Egypt’s economic reform program supported by an arrangement under the Extended Fund Facility (EFF).
- Completion of the review allows the authorities to draw the equivalent of SDR 1,432.76 million (about US$2 billion), bringing total disbursements to SDR 7,163.81 million (about US$10 billion).
- The three-year EFF arrangement is in the amount equivalent to SDR 8.597 billion (about US$12 billion at the time of approval, or 422 percent of quota) and was approved on November 11, 2016.

### Fiscal policy, targets, and priorities
- This year’s primary surplus target of 2 percent of GDP appears on track, which would achieve a cumulative fiscal adjustment of 5.5 percent of GDP in three years.
- Authorities remain committed to reaching cost recovery for most fuel products by mid-2019 and implementing automatic fuel price indexation; these measures are described as critical to encourage more efficient energy use and, combined with revenue enhancing reforms, to help create fiscal space for high-priority spending on health and education.
- Structural reform agenda targets long-standing constraints to private sector development, including reforms to improve competition policy, public procurement, management of SOEs, and land allocation.
- Sustained implementation of structural reforms is emphasized as essential to reduce opportunities for rent seeking and to support strong and inclusive medium-term growth and job creation.

### Monetary policy and external sector
- Monetary policy remains anchored by the medium-term objective of bringing inflation to single digits.
- Reserve of steps to deepen the foreign exchange market and allow greater exchange rate flexibility have been taken.
- Key external sector points: Egypt has narrowed its current account deficit and maintained gross international reserves; foreign direct investment (net) and capital and financial account flows are notable contributors to external financing.

### Key statistics and projections (Selections from Table 1: Egypt: Selected Macroeconomic Indicators, 2015/16–2019/20)
- Real GDP (market prices): 2015/16: 4.3; 2016/17: 4.2; 2017/18 Third Review Prel. Revised: 5.2; 2018/19 Proj.: 5.3; 2019/20 Proj.: 5.5; 5.9
- Consumer prices (end of period): 2015/16: 14.0; 2016/17: 29.8; 2017/18 Third Review Prel. Revised: 12.6; 2018/19 Proj.: 14.4; 2019/20 Proj.: 13.1; 14.5; 10.7
- Consumer prices (period average): 2015/16: 10.2; 2016/17: 23.5; 2017/18 Third Review Prel. Revised: 20.8; 2018/19 Proj.: 20.9; 2019/20 Proj.: 15.8; 12.8
- Gross Debt (percent of GDP): 2015/16: 96.9; 2016/17: 103.2; 2017/18 Third Review Prel. Revised: 92.4; 2018/19 Proj.: 92.6; 2019/20 Proj.: 86.2; 86.0; 83.3
  - External: 7.8; 18.1; 18.5; 19.2; 17.0; 18.0; 17.6
  - Domestic: 89.0; 85.0; 73.9; 73.4; 69.2; 68.0; 65.7
- Budget sector (percent of GDP):
  - Revenue and grants: 19.0; 18.2; 18.6; 18.3; 17.8
  - Expenditure (incl. net acquisition of financial assets): 30.7; 29.9; 27.9; 26.7; 26.6; 24.5
  - Of which: Energy subsidies: 3.0; 4.1; 3.4; 2.1; 1.2
  - Overall balance: -12.5; -10.9; -9.7; -9.8; -8.1; -8.3; -6.7
  - Overall balance, excl. grants: -12.7; -11.4
  - Primary balance: -3.5; -1.8; 0.2; 2.0
- Monetary sector:
  - Credit to the private sector: 14.2; 38.0; 7.5; 10.1; 18.9
  - Reserve money: 29.3; -7.8; 40.2; 28.3; 27.6; 34.2; 20.7
  - Broad money (M2): 39.3; 23.4; 19.8; 20.5
  - Treasury bill rate, 3 month (average, in percent): 11.8; 17.5; 18.8; …
- External sector:
  - Exports of goods (in US$, percentage change): -15.9; 16.2; 13.8; 16.5
  - Imports of goods (in US$, percentage change): -6.4; 2.8; 4.5; 6.9; 10.0; 6.4; 3.1
  - Merchandise trade balance: -11.6; -14.5; -14.9; -12.4; -11.3
  - Current account: -6.0; -5.6; -2.8; -2.4; -2.6; -2.5
  - Capital and financial account (incl. errors and omissions): 5.1; 4.8; 5.0; 4.0; 1.8
  - Foreign direct investment (net, in billions of US$): 6.8; 7.4; 9.5; 11.2
  - External debt: 41.3; 34.5; 37.4; 34.4; 31.3
  - Gross international reserves (in billions of US$): 17.1; 44.4; 43.5; 44.8; 44.9; 45.4
    - In months of next year's imports of goods and services: 6.6; 6.1; 6.3
    - In percent of short-term external debt: 173.7; 124.5; 146.2; 139.1; 191.4; 160.2; 147.7
  - Financing gap (in billions of US$): 0.0; 1.1
- Memorandum items:
  - Nominal GDP (in billions of Egyptian pounds): 2,709; 3,470; 4,436; 4,437; 5,365; 5,414; 6,458
  - Nominal GDP (in billions of US$): 332; 256; 250; 306; 303; 336
  - GDP per capita (in US$): 3,686; 2,704; 2,578; 2,573; 3,081; 3,052; 3,314
  - Unemployment rate (period average, percent): 12.7; 12.2; 11.1; 10.9; 9.7; 9.6; 8.3
  - Population (in millions): 90.2; 94.8; 97.0; 99.2; 101.5

### Policy recommendations and priorities highlighted by IMF
- Contain inflation and keep core inflation well anchored through restrictive monetary policy until objectives are met.
- Enhance exchange rate flexibility and deepen the foreign exchange market.
- Reduce public debt through fiscal consolidation and high nominal GDP growth.
- Achieve cost recovery for most fuel products and implement automatic fuel price indexation by mid-2019 to encourage efficient energy use and create fiscal space.
- Implement structural reforms to improve competition policy, public procurement, management of SOEs, and land allocation to support private sector development, reduce rent seeking, and promote inclusive growth and job creation.

*Press Release No. 19/33 — IMF Communications Department, February 5, 2019.*

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## References

- [David Lipton](http://www.imf.org/external/np/omd/bios/dl.htm)
- [Arab Republic of Egypt and the IMF](http://www.imf.org/external/country/EGY/index.htm)
- [Special Drawing Rights (SDRs) -- A Factsheet](https://www.imf.org/en/about/factsheets/sheets/2023/special-drawing-rights-sdr)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [see Press Release No. 16/501](https://www.imf.org/en/News/Articles/2016/11/11/PR16501-Egypt-Executive-Board-Approves-12-billion-Extended-Arrangement)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2019/02/05/pr1933-egypt-imf-exec-board-completes-4th-review-extended-fund-facility_