The International Monetary Fund (IMF) has reached an agreement with Egypt to release $1.2 billion in funds to support the country’s strained public finances. The deal, announced on Tuesday, is contingent upon approval from the IMF’s Executive Board.
As part of the agreement, Egyptian authorities have committed to raising the tax-to-revenue ratio by 2% of gross domestic product (GDP) over the next two years and accelerating the sale of state-owned companies, among other fiscal reforms.
“A comprehensive reform package is needed to ensure that Egypt rebuilds fiscal buffers to reduce debt vulnerabilities, and generates additional space to increase social spending, especially in health, education and social protection,” said Ivanna Vladkova Hollar, who led the IMF’s discussions with Egyptian officials.
Both parties also agreed on the need for swift reforms to improve the business environment. Hollar emphasized, “More decisive efforts are needed to level the playing field, reduce the state footprint in the economy, and increase private sector confidence to help Egypt attract foreign investment and develop its full economic potential.”
In March, Egypt secured an $8 billion loan from the IMF, which will be disbursed in stages subject to meeting specific economic reforms. This builds on a $3 billion, 46-month deal from December 2022.
As part of the loan terms, Egypt allowed its currency to sharply depreciate, letting the exchange rate be determined by market forces. The country has faced challenges such as double-digit inflation, foreign currency shortages, and declines in Suez Canal revenues, exacerbated by the war in Ukraine and the lingering effects of the COVID-19 pandemic.
