Washington, DC:
An International Monetary Fund (IMF) team led by Ms. Celine Allard held a
virtual mission from May 4 to 24, 2021 with the Egyptian authorities. The
mission held discussions on the 2021 Article IV Consultation with Egypt and
the second review of Egypt’s economic program supported by the IMF’s
12-month Stand-by Arrangement. At the end of the discussions, Ms. Allard
issued the following statement:
“The IMF staff team and the Egyptian authorities have reached a staff-level
agreement on the second review of Egypt’s economic program supported by the
IMF’s $5.2 billion Stand-by Arrangement (press release 20/248). This agreement is subject to approval by the IMF’s Executive Board,
which will take place in the coming weeks. Upon approval, an additional SDR
1.16 billion (about US$1.6 billion) will be made available to Egypt.
“Over the past 12 months, the authorities’ strong performance and
commitment helped achieve the program’s objectives of maintaining
macroeconomic stability during the pandemic while protecting necessary
social and health spending and implementing key structural reforms. Net
international reserve accumulation and the primary balance exceeded the
program targets.
Inflation continued to be subdued with March outturn (4.5 percent)
breaching the lower inner bound of the monetary policy consultation
clause.
All structural benchmarks were met including further advancing reforms
related to fiscal transparency and governance, social protection, and
improvement in the business environment, while continuing efforts directed
towards reducing debt vulnerabilities and creating more budget space for
priority spending.
The publication of information related to COVID-19 crisis-related
spending, procurement plan, and beneficial ownership of awarded
entities is a welcome step towards further enhancing transparency.
“Supported by the authorities’ strong implementation of their policy
program, the economy has shown resilience. Growth is expected to be 2.8
percent in FY2020/21, rising to 5.2 percent in FY2021/22. However,
uncertainty remains against the backdrop of lingering pandemic-related
risks. Policies are appropriately focused on supporting the recovery in the
near term while deepening and broadening structural reforms to unleash
Egypt’s enormous growth potential in the medium term.
“The Central Bank of Egypt’s (CBE) monetary policy remains data dependent.
We welcome the CBE’s readiness to act as necessary to support economic
recovery amid muted inflation. Continued exchange rate flexibility in both
directions will help absorb external shocks. Egypt's banking system remains
liquid, profitable, and well capitalized.
“Egypt’s fiscal policy in FY2021/22 appropriately targets a gradual
consolidation to balance needed support for the economic recovery while
safeguarding fiscal sustainability. The continued shift towards higher
investments in infrastructure, health, and education in the next fiscal
year is also welcome. The government’s commitment to returning to a primary
surplus of 2 percent of GDP starting in FY2022/23 and as the economic
recovery becomes entrenched will be essential to reduce public debt and
support fiscal sustainability.
“The recent launch of the National Structural Reform Program (NSRP) is a
signal of the government’s commitment to fostering human capital
development, more efficient and transparent public institutions, a more
competitive and export-oriented private sector, and a greener economy. It
will be important in the coming months to further define specific policy
measures to support these objectives, including to allow more space for the
private sector to operate in a competitive environment, and to encourage
exports through further reducing trade impediments.
“The team would like to thank the Egyptian authorities and the technical
teams at the CBE and the Ministry of Finance, and other interlocutors for
the constructive and candid discussions.”