{
  "title": "Egypt Takes Proactive Approach to Limit the Pandemic’s Fallout",
  "publication": "IMF News, July 9, 2020",
  "sourceUrl": "https://www.imf.org/en/news/articles/2020/07/09/na070920-egypt-takes-proactive-approach-to-limit-the-pandemics-fallout",
  "canonical": "https://www.imf.org/en/news/articles/2020/07/09/na070920-egypt-takes-proactive-approach-to-limit-the-pandemics-fallout",
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  "summary": "As part of Egypt’s two-step request for IMF financing to respond to COVID-19, $5.2 billion was approved under the 12-month Stand-by Arrangement (SBA). Financing under the SBA follows the $2.8 billion approved in May under the IMF’s Rapid Financing Instrument.",
  "publishDate": "2020-07-09",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Publication date: July 9, 2020\n- As part of Egypt’s two-step request for IMF financing to respond to COVID-19:\n  - $2.8 billion was approved in May under the IMF’s Rapid Financing Instrument.\n  - $5.2 billion was approved under the 12-month Stand-By Arrangement (SBA)."
    },
    {
      "heading": "Economic impact of COVID-19 on Egypt",
      "content": "- Channels of impact:\n  - Virus containment measures.\n  - Sudden stop in tourism.\n  - Fall in exports.\n  - Drop in remittances.\n  - Lower revenue from the Suez Canal.\n- Capital flows:\n  - At the peak of global risk aversion during March and April, Egypt experienced capital outflows of nearly $16 billion.\n- Balance of payments and growth:\n  - Combination of the above factors put considerable pressure on the balance of payments.\n  - With the global economy in recession and domestic activity curtailed, growth is expected to significantly decline.\n- Fiscal pressures:\n  - Revenue is falling just as the government needs to urgently ramp up spending on health and social protection."
    },
    {
      "heading": "IMF support and financing strategy",
      "content": "- Two-step IMF engagement:\n  - First step: $2.8 billion under the Rapid Financing Instrument (approved in May) to respond with health and social spending for the most vulnerable groups.\n  - Second step: 12-month SBA with access to $5.2 billion to help preserve economic gains of the past four years, ensure adequate health and social spending, and advance structural reforms for sustained recovery.\n- Objectives of IMF-supported program:\n  - Preserve economic gains of the past four years.\n  - Continue adequate health and social spending.\n  - Further advance structural reforms to position Egypt for sustained recovery."
    },
    {
      "heading": "Protection of poor and vulnerable populations",
      "content": "- Three-pronged government approach:\n  - First:\n    - Increased allocations for health spending since the onset of the pandemic.\n    - Expanded coverage under conditional cash transfer programs Takaful and Karama (Solidarity and Dignity).\n    - New programs to provide cash transfers to irregular workers substantially affected by the crisis.\n    - Distribution of medical and sanitation kits to poor villages.\n    - Collaboration with NGOs to provide additional support to the needy.\n  - Second:\n    - Commitment to a minimum level of spending for health and social programs to ensure continued provision of critical social protection.\n  - Third:\n    - Undertake a review of social spending—initially focusing on social protection, then on health and education—to assess adequacy and efficiency and identify areas for improvement.\n    - The World Bank is supporting this review."
    },
    {
      "heading": "Policy measures under the Stand-By Arrangement to support recovery",
      "content": "- Fiscal policy stance:\n  - Fiscal policy is being eased to support the economy and address crisis needs.\n  - Crisis-related spending increases include:\n    - Health spending (26 percent).\n    - Social protection (10 percent).\n  - Measures to partially offset the revenue shortfall include promoting green recovery through a fee on the consumption of fuel products.\n- Debt and medium-term fiscal sustainability:\n  - Crisis spending needs to be weighed against avoiding an excessive increase in public debt.\n  - Once recovery begins, the government aims to resume debt reduction and maintain medium-term fiscal sustainability.\n  - Authorities are updating their debt strategy to reduce debt vulnerabilities and working to mobilize additional revenue to accommodate higher social spending.\n- Monetary and financial sector framework:\n  - Authorities are committed to maintaining low and stable inflation.\n  - Preserve exchange rate flexibility and allow orderly exchange rate adjustments.\n  - Maintain financial sector stability with ongoing strong supervision and close monitoring of emerging financial risks.\n- Structural reform commitments:\n  - Continue structural reforms begun under the Extended Fund Facility, including:\n    - Improve the budget process.\n    - Increase transparency on the financial operations of state-owned enterprises and economic authorities.\n    - Strengthen competition by helping level the playing field.\n    - Amend the customs law to improve Egypt’s investment climate."
    },
    {
      "heading": "Role of earlier reforms in building resilience",
      "content": "- Reforms since 2016:\n  - The economic reform program adopted from 2016 greatly enhanced the economy’s resilience.\n  - Before the pandemic:\n    - Growth was above 5 percent.\n    - International reserves were comfortable.\n    - Debt was on a downward trajectory.\n  - Government had embarked on additional reforms to enhance the business environment and adopt a private sector-led growth model to enhance job creation.\n  - These steps enabled the government to swiftly launch a comprehensive pandemic response.\n  - Despite significant progress to reduce poverty and inequality, challenges remain."
    },
    {
      "heading": "Transparency and accountability for crisis spending",
      "content": "- Commitments on disclosure and auditing:\n  - Government will publish details of all crisis-related spending in a consolidated manner on the Ministry of Finance website.\n  - Government will post procurement plans and contracts awarded for emergency responses to COVID-19, including names of the companies concerned and information on beneficial ownership.\n  - The Accountability State Authority will audit crisis-mitigating inflows as well as spending and publish the results after the end of the fiscal year.\n\nInternational Monetary Fund; July 9, 2020\n\n---\n\n\n References\n\n- https://www.imf.org/en/News/country-focus\n- PRESS CENTER\n- Learn about IMF emergency financing\n- Read the press release\n- Egypt and the IMF\n- $2.8 billion in financing\n- Stand-By Arrangement\n- bold economic reform program that Egypt adopted\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2020/07/09/na070920-egypt-takes-proactive-approach-to-limit-the-pandemics-fallout"
    }
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    "Published: July 9, 2020",
    "Publication date: July 9, 2020",
    "As part of Egypt’s two-step request for IMF financing to respond to COVID-19:",
    "Channels of impact:",
    "Capital flows:",
    "Balance of payments and growth:",
    "Fiscal pressures:",
    "Two-step IMF engagement:",
    "Objectives of IMF-supported program:",
    "Three-pronged government approach:",
    "Fiscal policy stance:",
    "Debt and medium-term fiscal sustainability:",
    "Monetary and financial sector framework:",
    "Structural reform commitments:",
    "Reforms since 2016:",
    "Commitments on disclosure and auditing:",
    "[https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[Learn about IMF emergency financing](https://www.imf.org/en/About/Factsheets/Sheets/2016/08/02/19/55/Rapid-Financing-Instrument)",
    "[Read the press release](https://www.imf.org/en/News/Articles/2020/06/26/pr20248-egypt-imf-executive-board-approves-12-month-us-5-2billion-stand-by-arrangement)",
    "[Egypt and the IMF](https://www.imf.org/en/Countries/EGY)",
    "[$2.8 billion in financing](https://www.imf.org/en/News/Articles/2020/05/11/pr20215-egypt-imf-executive-board-approves-us-2-772b-in-emergency-support-to-address-the-covid19)",
    "[Stand-By Arrangement](https://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/20/33/Stand-By-Arrangement)",
    "[bold economic reform program that Egypt adopted](https://www.imf.org/en/News/Articles/2019/07/24/na072419-egypt-a-path-forward-for-economic-prosperity)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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