## IMF Executive Board Completes the First and Second Reviews of Extended Fund Facility Arrangement for Egypt, Approves Augmentation of the Arrangement

_IMF News, March 29, 2024_

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**Canonical URL:** [IMF Executive Board Completes the First and Second Reviews of Extended Fund Facility Arrangement for Egypt, Approves Augmentation of the Arrangement](https://www.imf.org/en/news/articles/2024/03/29/pr24101-egypt-imf-executive-board-completes-first-second-reviews-eff-approves-augmentation)

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## Bibliographic details
- Published: March 29, 2024

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### Board decision and program augmentation
- The Executive Board completed the First and Second Reviews of the extended arrangement under the Extended Fund Facility (EFF) for Egypt.
- The Board approved an augmentation of the original program by about US$5 billion (SDR 3.76 billion).
- This augmentation enables the authorities to immediately draw about US$820 million (SDR 618.1 million).
- Egypt’s 46-month EFF arrangement was approved on December 16, 2022.
- In completing the review, the Executive Board assessed that all but one of the quantitative performance targets for end-June 2023 were met.
- The Board approved the authorities’ request for a waiver for non-observance of the June performance criterion on Net International Reserves on the basis of corrective actions.

### Macroeconomic assessment and outlook
- Recent macroeconomic conditions have been challenging, with rising inflation, foreign exchange shortages and elevated debt levels and financing needs.
- External shocks cited: Russia’s war in Ukraine; the conflict in Gaza and Israel; tensions in the Red Sea.
- These developments reduced Suez Canal receipts and increased the complexity of macroeconomic challenges.
- Growth and inflation projections:
  - Growth slowed to 3.8 percent in FY2022/23.
  - Growth is projected to slow to 3 percent in FY2023/24.
  - Growth is projected to recover to about 4½ percent in FY24/25.
  - Inflation (end of period) was 35.7 percent in 2022/23, projected 32.1 percent in 2023/24, and 15.3 percent in 2024/25.
  - Inflation (period average) was 24.4 percent in 2022/23, projected 32.5 percent in 2023/24, and 25.7 percent in 2024/25.
- The recent US$35 billion investment deal from an Abu Dhabi-based investment and holding company in Ras El-Hekma has alleviated near-term balance of payment pressures and, if used judiciously, will help Egypt rebuild buffers.

### Policy measures, program priorities, and conditionality
- The program centers on:
  - A liberalized foreign exchange system in the context of a flexible exchange rate regime.
  - A significant tightening of the policy mix.
  - Reducing public investment.
  - Leveling the playing field to allow the private sector to become the engine of growth.
- Recent measures highlighted as critical:
  - Unification of the exchange rate.
  - Clearance of the foreign exchange demand backlog.
  - Significant tightening of monetary and fiscal policies.
- The authorities committed to use a large part of the new financing from the Ras El-Hekma deal to:
  - Improve the level of reserves.
  - Fast-track the clearance of foreign currency backlogs and arrears.
  - Reduce government debt upfront.
- Fiscal management measures:
  - Implementation of the newly established framework to monitor and control public investment to help manage excess demand.
  - Pursuit of a revenue-based fiscal consolidation to put debt on a downward path and provide resources for expanding the social safety net.
  - Replace untargeted fuel subsidies with targeted social spending as part of a sustained fuel price adjustment package.
- Structural reforms priority:
  - Withdrawing the state and military from economic activity.
  - Leveling the playing field between the public and private sectors to attract foreign and domestic private investment.

### Risks and implementation challenges
- External risks:
  - High external uncertainty remains, including ongoing geopolitical shocks and disruptions affecting trade and tourism.
- Domestic risks:
  - Sustaining the shift to a liberalized foreign exchange system.
  - Maintaining tight monetary and fiscal policies.
  - Integrating transparently off-budget investment into macroeconomic policy decision making.
  - Managing the resumption of capital inflows prudently to contain inflationary pressures and limit the risk of future external pressures.
- The IMF emphasized that robust delivery on structural reforms is critical to lock in the benefits of the improved financing environment and sustainably address macroeconomic challenges.

### Selected macroeconomic indicators (fiscal year ends June 30)
- Output
  - Real GDP growth (%): 2022/23: 3.8; 2023/24: 3.0; 2024/25: 4.4
- Employment
  - Unemployment (%): 2022/23: 7.2; 2023/24: --
- Prices
  - Inflation (%, end of period): 2022/23: 35.7; 2023/24: 32.1; 2024/25: 15.3
  - Inflation (%, period average): 2022/23: 24.4; 2023/24: 32.5; 2024/25: 25.7
- Budget sector (budget sector comprises central government, local governments, and some public corporations)
  - Revenue and grants (% GDP): 2022/23: 15.4; 2023/24: 16.2
  - Expenditure (% GDP): 2022/23: 21.4; 2023/24: 21.7; 2024/25: 24.7
  - Overall balance (% GDP): 2022/23: -6.0; 2023/24: -6.3; 2024/25: -8.5
  - Primary balance including divestment proceeds (% GDP): 2022/23: 1.6; 2023/24: 7.1; 2024/25: 4.5
  - Gross debt, general government (% GDP): 2022/23: 95.9; 2023/24: 96.4; 2024/25: 82.6
- Money and credit
  - Broad money (M2, % change): 2022/23: 38.6; 2023/24: 18.5
  - Credit to the private sector (% change): 2022/23: 25.4; 2023/24: 30.0; 2024/25: 25.0
- Balance of payments
  - Current account (% GDP): 2022/23: -1.2; 2023/24: -2.4
  - FDI, net (% GDP): 2022/23: 2.5; 2023/24: 9.3
  - Reserves (months imports): 2022/23: 5.3; 2023/24: 7.3; 2024/25: 6.9
  - External debt (% GDP): 2022/23: 41.8; 2023/24: 43.0; 2024/25: 45.4
- Exchange rate
  - Real Effective Exchange Rate (% change; appreciation +): 2022/23: -22.1

*International Monetary Fund, Press Release No. 24/101 (March 29, 2024).*

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## References

- [https://www.imf.org/en/about/senior-officials/bios/kristalina-georgieva](https://www.imf.org/en/about/senior-officials/bios/kristalina-georgieva)
- [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/)
- [approved](https://www.imf.org/en/News/Articles/2022/12/16/pr22441-egypt-imf-executive-board-approves-46-month-usd3b-extended-arrangement)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2024/03/29/pr24101-egypt-imf-executive-board-completes-first-second-reviews-eff-approves-augmentation_