Egypt-IMF Executive Board Completes Fifth Review under the Arrangement under Extended Fund Facility (EFF)

IMF News, July 24, 2019

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Canonical URL: Egypt-IMF Executive Board Completes Fifth Review under the Arrangement under Extended Fund Facility (EFF)

On July 24, 2019, the Executive Board of the International Monetary Fund completed the fifth and final 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).
Total disbursements under the arrangement amount to SDR 8,596.57 million (about US$11.9 billion or 422 percent of quota), which is the full amount approved by the Executive Board on November 11, 2016 (see Press Release No. 16/501).

Egypt has successfully completed the three-year arrangement under the EFF and achieved its main objectives.
The macroeconomic situation has improved markedly since 2016, supported by the authorities’ strong ownership of their reform program and decisive upfront policy actions.
Critical macroeconomic reforms have been successful in correcting large external and domestic imbalances, achieving macroeconomic stabilization and a recovery in growth and employment, and putting public debt on a clearly declining trajectory.
Monetary policy:
- Remains anchored by the medium-term objective of bringing inflation to single digits.
- Core inflation appears to be well contained, but the central bank should remain cautious until disinflation is firmly entrenched.
- Exchange rate flexibility remains essential to improve resilience to shocks and preserve competitiveness.

The 2018/19 primary surplus target of 2 percent of GDP was met, helping to anchor a further decline in the public-debt-to-GDP ratio.
It will be important to maintain primary surpluses at this level over the medium term to keep public debt on a downward trajectory.
The elimination of most fuel subsidies, which are regressive, is expected to:
- Encourage energy efficiency.
- Help protect the budget from unexpected changes in oil prices.
- Free up fiscal space for social spending.
Improved revenue mobilization is essential to create room for spending in health, education, and social protection.

The outlook remains favorable and provides an opportune juncture to further advance structural reforms to support more inclusive private-sector led growth and job creation.
The authorities have launched important reforms of:
- Competition policy
- Public procurement
- Industrial land allocation
- State-owned enterprises
Sustained implementation will be essential to ensure that statutory 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.

Review completion date: July 24, 2019.
Arrangement duration: three-year arrangement.
Draw allowed upon review completion: SDR 1,432.76 million (about US$2 billion).
Total disbursements: SDR 8,596.57 million (about US$11.9 billion or 422 percent of quota).
Original Executive Board approval: November 11, 2016 (Press Release No. 16/501).
2018/19 primary surplus target: 2 percent of GDP.
Inflation target objective: bring inflation to single digits.

Press Release No. 19/300 — International Monetary Fund, July 24, 2019.