Egypt is close to reaching an agreement with the International Monetary Fund (IMF) to support its economic recovery and structural reforms, the IMF said on Monday.
The IMF and Egyptian authorities have been in talks since January to finalize a new financing arrangement under the Extended Fund Facility (EFF), which provides longer-term loans to countries facing balance of payments problems.
The EFF would replace the $5.2 billion Stand-By Arrangement (SBA) that Egypt secured in June 2020 to cope with the impact of the COVID-19 pandemic. The SBA expires in June 2024.
The IMF said in a statement that the discussions have made “excellent progress” and that the new program would aim to “build on the achievements under the SBA, preserve macroeconomic stability, and support the recovery from the COVID-19 crisis.”
The IMF also praised Egypt’s” prudent” fiscal and monetary policies, which have helped reduce public debt, lower inflation, and increase foreign reserves. It also commended the government’s efforts to protect the most vulnerable groups, expand social safety nets, and advance structural reforms to boost growth and job creation.
The IMF did not disclose the size or duration of the new EFF, but said it would be “in line with Egypt’s medium-term financing needs and capacity to repay the Fund.” The EFF usually lasts for three to four years and can provide up to 435% of a country’s quota in the IMF.
The IMF’s executive board is expected to review and approve the new EFF in the coming weeks, after the Egyptian authorities complete the necessary prior actions and secure the required financing assurances from other creditors.
Egypt is the largest recipient of IMF loans in the Middle East and North Africa region, having borrowed about $20 billion since 2016 to support its economic reform program. The program has helped Egypt restore macroeconomic stability, improve its business climate, and attract foreign investment.
However, the program has also faced criticism for imposing harsh austerity measures, such as subsidy cuts and tax hikes, that have increased the hardship for millions of Egyptians living in poverty. The COVID-19 pandemic has also exacerbated the social and economic challenges, especially for the informal sector and the tourism industry.
The new EFF is expected to address these issues by balancing fiscal consolidation with social spending, enhancing the resilience and inclusiveness of the economy, and promoting green and digital transformation.
Egyptian officials have expressed optimism about the prospects of the new EFF, saying it would boost confidence, support growth, and create jobs. They have also pledged to continue implementing the necessary reforms to achieve the program’s objectives and ensure debt sustainability.
The IMF said it remains a “strong partner” of Egypt and stands ready to support its efforts to “build a more prosperous and resilient future for the Egyptian people.”
Source: Reuters
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