## Transcript of Press Briefing on Egypt

_IMF News, March 13, 2025_

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## Bibliographic details
- Published: March 13, 2025

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### Executive actions and approvals
- On Monday, March 10th the Executive Board completed the 4th review of Egypt's economic reform program under the EFF.
- Completion of the 4th review enables the authorities to immediately draw about $1.2 billion.
- The IMF Executive Board approved the authorities’ request for an arrangement under the Resilience and Sustainability Facility (RSF) with access of about $1.3 billion.
- The Executive Board also concluded the 2025 Article IV Consultation with Egypt.
- The RSF arrangement runs through the duration of the underlying EFF, through the fall of 2026, and is disbursed in pieces linked to reform implementation.

### Economic outlook and key indicators
- Recent signs of recovery in economic growth; private non-oil sector indicators suggest a tentative expansion after a long contraction.
- Inflation:
  - A particularly encouraging drop in February driven largely by base effects from February 2024.
  - Current projection (pre-February release) of about 16.6% for end June (end of this fiscal year).
  - Projection for fiscal year 2025–2026: inflation at the end of the period of 13.4.
- Growth projection for fiscal year 2025–2026: 4.1.
- Current account:
  - Expectation that the current account will be fairly elevated this year.
  - Projected to come down to about 3.5% of GDP for fiscal year 2025–2026.
- Foreign exchange and reserves:
  - Unification of the exchange rate in March 2024 and introduction of a flexible exchange rate regime eliminated gaps with the parallel rate and backlogs of unmet import demand.
  - Tourism income has remained robust; foreign exchange reserves are now at adequate levels despite reduced Suez Canal inflows.

### Program implementation, conditionality, and disbursements
- RSF disbursement mechanics:
  - The RSF for Egypt has ten reform measures (RMs), each RM associated with one tenth of the overall RSF disbursement.
  - Disbursements tied to completion of individual RMs and reviewed at the time of EFF reviews.
  - Three RMs are scheduled to be reviewed within the end of this fiscal year (measures due in June).
- Timing:
  - The $1.2 billion disbursement associated with completing the 4th review is available immediately and, if not already delivered, will be delivered in March.
  - The fifth review is expected, according to the current disbursement schedule, to take place before end June; disbursement becomes immediately available once the Board considers the review.

### Fiscal and debt dynamics
- Debt-to-GDP ratio has begun to decline following fiscal consolidation and exchange rate unification.
- Primary drivers of the downward debt path:
  - Continued fiscal consolidation delivering on a primary balance.
  - Debt management actions by the Ministry of Finance.
  - Use of divestment proceeds for reduction of debt and financing needs.
- Debt management:
  - Adoption of a medium-term debt management strategy is identified as necessary for ensuring debt sustainability.
  - IMF engagement: the IMF has discussed the importance of debt management with authorities but does not co-write debt management strategies.

### Structural reform progress and priorities
- Mixed progress on structural reforms; notable delays on reforms related to divestment and leveling the playing field between public and private enterprises.
- Structural benchmarks and reforms delivered include:
  - Submission to Parliament of a tax package (structural benchmark for November) to broaden domestic revenue mobilization.
  - Measures to strengthen the independence of the Egyptian Competition Authority.
  - Reforms to kickstart an assessment of governance of state-owned banks.
  - Completion of the Household Income Expenditure Survey (structural benchmark) to underpin social protection targeting.
- Policy priorities emphasized:
  - Transition from stabilization to transformative phase by accelerating structural reforms to unlock growth and resilience.
  - Decisively reducing the role of the public sector in the economy.
  - Transforming monetary and exchange rate policy through implementation of inflation targeting within a flexible exchange rate regime and sustaining this reform over time.
  - Broadening the tax base, streamlining tax incentives, and enhancing compliance to enable sufficient government spending on development and social needs.
  - Implementing macroeconomically critical climate reforms to address adaptation needs and enhance long-term resilience.

### Program performance, missed criteria, and waivers
- For the 4th review the authorities met all but two of the quantitative performance criteria relevant for the review; waivers were requested and granted based on corrective actions.
- Two missed quantitative performance criteria:
  - End-December target to reduce the stock of central bank credit to public authorities (legacy monetary financing). The end-December target was missed but corrective measures were implemented and the stock was reduced back to target before the Board meeting.
  - End-December primary balance target. The program’s primary balance definition includes divestment proceeds; divestment proceeds were not available in December and some non-tax revenues underperformed. Corrective actions (including allocating additional FDI proceeds to debt reduction and holding back some expenditure categories) supported approval of the waiver.
- Structural reform implementation has progressed sufficiently in a number of areas to allow completion of the review, but delays remain in areas such as divestment.

### Social protection and subsidy policy
- Rationale: untargeted energy and fuel subsidies are not an efficient use of scarce public resources and are poorly targeted to those most in need.
- Authorities’ public commitment: bring retail fuel prices to cost recovery levels by end December of 2025.
- Safeguards for vulnerable groups:
  - Egypt has a well-targeted cash transfer program (Takaful and Karama) as the main vehicle to protect vulnerable households from subsidy-reform impacts.
  - Authorities committed under the EFF to extend resources allocated to Takaful and Karama and have announced augmentations.
  - The Household Income Expenditure Survey provides the analytical basis for expanding coverage or benefits in a targeted manner.

### Risks, recommendations, and next steps
- Risks:
  - Persistent external shocks (regional conflicts, trade disruptions in the Red Sea) and energy-sector difficulties continue to contribute to elevated external deficits and vulnerabilities.
  - Delays in divestment and structural reforms could slow the transition from stabilization to sustainable growth.
- Recommendations and conditionalities:
  - Sustain exchange rate flexibility and transition to inflation targeting within a flexible exchange rate regime to avoid FX rationing and abrupt devaluations.
  - Accelerate structural reforms to reduce public sector footprint, improve competition, enhance governance of state-owned banks, and unlock private investment.
  - Continue fiscal consolidation while broadening and strengthening domestic revenue mobilization.
  - Implement targeted social-protection measures (via Takaful and Karama) to protect vulnerable groups during subsidy reform.
  - Advance and operationalize a medium-term debt management strategy and ensure divestment proceeds are used for debt reduction.

*Transcript of Press Briefing on Egypt, March 13, 2025 — IMF Communications Department*

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## References

- [Arab Republic of Egypt and the IMF](http://www.imf.org/external/country/EGY/index.htm)
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