Global: Egypt Secures $1.2 Billion IMF Loan Agreement

Egypt has reached a staff-level agreement with the International Monetary Fund (IMF) on the fourth review of the Extended Fund Facility (EFF), paving the way for access to $1.2 billion (SDR 922.87 million). This agreement, led by IMF mission chief Ivanna Vladkova Hollar, remains subject to approval by the IMF Executive Board.

In light of challenging global and domestic economic conditions, the agreement focuses on recalibrating Egypt’s fiscal path to safeguard critical social programs, particularly those supporting vulnerable groups and the middle class, while ensuring debt sustainability.

Key Highlights of the Agreement

Fiscal Recalibration for Social Support
The IMF and Egyptian authorities have agreed to a revised fiscal consolidation strategy. This approach will allow Egypt to achieve a primary surplus of 4% of GDP by FY 2025/26—slightly lower than previous commitments—before increasing to 5% of GDP by FY 2026/27. This adjustment creates fiscal space to expand essential social programs while maintaining debt sustainability.

Strengthening Domestic Revenues
Egypt plans to implement a series of tax reforms, targeting a 2% increase in tax-to-GDP revenues within two years. These efforts will emphasize eliminating tax exemptions over raising rates, fostering long-term fiscal stability and revenue growth.

Business Environment Reforms
To bolster private sector confidence and attract foreign investment, Egypt will prioritize:

• Reducing the state’s economic footprint.
• Accelerating its divestment program.
• Leveling the playing field for private enterprises.

These measures aim to position the private sector as the primary driver of economic growth.

Commitment to Monetary Stability
The Central Bank of Egypt (CBE) reaffirmed its dedication to maintaining a flexible exchange rate, tightening monetary policies to combat inflation, and advancing towards a full inflation-targeting framework. Enhancing governance, competition, and resilience in the financial sector also remains a priority.

Public Investment and SOE Oversight
The agreement emphasizes tighter controls on public investments and mitigating fiscal risks from state-owned enterprises, particularly in the energy sector. Strict adherence to public investment ceilings will play a crucial role in reducing fiscal vulnerabilities.

Forward-Looking Goals

Egypt’s reform agenda under the EFF agreement will also focus on:

• Modernizing the tax system.
• Increasing social spending in critical areas like health and education.
• Enhancing governance and transparency across all sectors.

With these measures, Egypt aims to stabilize its economy, unlock its growth potential, and reduce its debt burden while prioritizing the well-being of its citizens.

IMF mission chief Ivanna Vladkova Hollar stated, “While Egypt faces significant external challenges, the government’s commitment to these reforms, particularly accelerating the divestment program and improving the business climate, is crucial to achieving sustainable growth and reducing economic vulnerabilities.”

By maintaining a collaborative approach with the IMF, Egypt continues to strengthen its economic framework and address pressing fiscal and social challenges.