## Egypt: IMF Staff Concludes Mission for 2021 Article IV and Second Review for the 12-Month Stand-by Arrangement _IMF News, May 25, 2021_ ## Source details **Canonical URL:** [Egypt: IMF Staff Concludes Mission for 2021 Article IV and Second Review for the 12-Month Stand-by Arrangement](https://www.imf.org/en/news/articles/2021/05/25/pr21140-egypt-imf-staff-concludes-mission-2021-article-iv-second-review-12-month-sba) ## Other formats - [Markdown version](/en/news/articles/2021/05/25/pr21140-egypt-imf-staff-concludes-mission-2021-article-iv-second-review-12-month-sba/index.md) - [Structured JSON version](/en/news/articles/2021/05/25/pr21140-egypt-imf-staff-concludes-mission-2021-article-iv-second-review-12-month-sba/index.json) - [Bundle manifest](/en/news/articles/2021/05/25/pr21140-egypt-imf-staff-concludes-mission-2021-article-iv-second-review-12-month-sba/bundle-manifest.json) ## Bibliographic details - Authors: Arrangement. Over - Published: May 25, 2021 --- ### Mission summary and program status - IMF team led by Ms. Celine Allard conducted a virtual mission from May 4 to 24, 2021 with the Egyptian authorities to discuss the 2021 Article IV Consultation and the second review of Egypt’s economic program under the IMF’s 12-month Stand-by Arrangement. - The IMF staff team and the Egyptian authorities 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 Executive Board approval, an additional SDR 1.16 billion (about US$1.6 billion) will be made available to Egypt. - Over the past 12 months, authorities’ implementation helped achieve program objectives of maintaining macroeconomic stability during the pandemic while protecting necessary social and health spending and implementing key structural reforms. ### Macroeconomic performance and risks - Growth projections: - Growth is expected to be 2.8 percent in FY2020/21. - Growth is expected to rise to 5.2 percent in FY2021/22. - Inflation: - Inflation continued to be subdued with March outturn (4.5 percent) breaching the lower inner bound of the monetary policy consultation clause. - External support and financing: - The COVID-19 crisis impact was mitigated by a two-step request for the IMF’s Rapid Financing Facility and Stand-by Arrangement package of around $8 billion. - Net international reserve accumulation and the primary balance exceeded program targets. - Banking and monetary conditions: - The Central Bank of Egypt’s (CBE) monetary policy remains data dependent. - Continued exchange rate flexibility in both directions is recommended to help absorb external shocks. - Egypt's banking system remains liquid, profitable, and well capitalized. - Uncertainty: - Uncertainty remains against the backdrop of lingering pandemic-related risks. ### Structural reforms and transparency - All structural benchmarks were met, including reforms related to: - Fiscal transparency and governance. - Social protection. - Improvement in the business environment. - Continued efforts to reduce debt vulnerabilities and create 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 was noted as a welcome step toward enhancing transparency. - The recent launch of the National Structural Reform Program (NSRP) signals commitment to: - Human capital development. - More efficient and transparent public institutions. - A more competitive and export-oriented private sector. - A greener economy. - The IMF noted it will be important to further define specific policy measures to support NSRP objectives, including allowing more space for the private sector to operate in a competitive environment and encouraging exports through further reducing trade impediments. ### Fiscal policy stance and targets - Fiscal policy in FY2021/22: - Appropriately targets a gradual consolidation to balance needed support for the economic recovery while safeguarding fiscal sustainability. - Continues a shift towards higher investments in infrastructure, health, and education in the next fiscal year. - Medium-term fiscal anchor: - Government commitment to returning to a primary surplus of 2 percent of GDP starting in FY2022/23, as the economic recovery becomes entrenched, is essential to reduce public debt and support fiscal sustainability. ### Policy recommendations (IMF views) - Near-term policies: - Fiscal and monetary policies should continue to support the economic recovery while preserving macroeconomic stability. - Monetary policy: - The CBE should remain data dependent and act as necessary to support economic recovery amid muted inflation. - Maintain continued exchange rate flexibility in both directions to absorb external shocks. - Structural reforms: - Deepen and broaden structural reforms to solidify the recovery, address post-COVID-19 challenges, strengthen buffers, and ensure higher and more inclusive growth. - Further define specific measures under the NSRP to foster human capital, efficient public institutions, a competitive private sector, and export promotion. - Transparency and governance: - Continue publishing information on COVID-19 spending, procurement plans, and beneficial ownership to enhance transparency. - Fiscal consolidation path: - Gradually consolidate while protecting priority spending and aim for a primary surplus of 2 percent of GDP starting in FY2022/23. *Source: Press Release No. 21/140, May 25, 2021, IMF.* --- ## References - [Arab Republic of Egypt and the IMF](http://www.imf.org/external/country/EGY/index.htm) - [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance) - [Press Releases](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [press release 20/248](https://www.imf.org/en/News/Articles/2020/06/26/pr20248-egypt-imf-executive-board-approves-12-month-us-5-2billion-stand-by-arrangement) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2021/05/25/pr21140-egypt-imf-staff-concludes-mission-2021-article-iv-second-review-12-month-sba_