Egypt & IMF Agree on Fourth Review of USD 8 Billion Loan Program

The International Monetary Fund (IMF) has reached a staff-level agreement with Egypt on the fourth review of the USD 8 billion Extended Fund Facility (EFF) loan program. This agreement, pending approval by the IMF's executive board, will enable Egypt to access a USD 1.2 billion tranche.

The review discussions, conducted in person from November 6th to the 20th followed by virtual meetings, emphasised Egypt’s efforts to maintain macroeconomic stability amidst external pressures, including regional tensions that have sharply reduced Suez Canal revenues.

Egyptian authorities have requested a recalibration of medium-term fiscal commitments in response to ongoing domestic and external economic challenges. The primary balance surplus is projected to reach 4% of GDP by FY2025/2026, rising to 5% by FY2026/2027, in line with original program targets. The fiscal recalibration seeks to enhance social programs for vulnerable groups and the middle class while maintaining debt sustainability. The IMF underscored the importance of fiscal consolidation to reduce high-interest costs, domestic financing needs, and risks linked to state-owned enterprises in the energy sector. Adherence to public investment ceilings was highlighted as a priority.

To improve fiscal outcomes, the Egyptian government plans to simplify the tax system and eliminate exemptions, aiming to increase tax-to-GDP revenue by 2% over the next two years. The IMF emphasised the urgency of accelerating reforms to enhance the business environment and prioritize private sector growth. Reducing state involvement in the economy, leveling the playing field, and expediting the divestment program are considered vital steps toward unlocking Egypt’s economic potential. The Central Bank of Egypt (CBE) has reaffirmed its commitment to a flexible exchange rate regime and tight monetary policies to combat inflation. Plans to transition to an inflation-targeting regime are underway, alongside efforts to strengthen governance, competition, and resilience within the financial sector.

The IMF’s October report projects Egypt’s GDP growth to recover to 4.1% in FY2025/2026, up from an expected 2.7% in FY2024/2025.