Egypt Daily News – The International Monetary Fund (IMF) announced on Tuesday that it had reached an agreement with the Egyptian authorities, allowing the disbursement of a $1.2 billion tranche to Cairo. As expected, the World Bank also approved the release of a $1.2 billion tranche as part of a multi-billion-dollar loan requested by Egypt to address its fiscal deficit.
Ivanna Vladkova Hollar, who led the IMF delegation in negotiations with Egyptian officials, stated that Egypt had continued to implement “key policies that maintain macroeconomic stability despite ongoing regional tensions that have caused a sharp decline in Suez Canal revenues.” In a statement, she added that “continued implementation of fiscal consolidation efforts will be essential to maintain debt sustainability and reduce high interest costs.”
The IMF noted that both sides had reached a staff-level agreement regarding the fourth review under the Extended Fund Facility (EFF). Vladkova Hollar also praised Egypt’s plans to simplify its tax system but stressed that “further reforms will be needed to strengthen domestic revenue mobilization efforts.”
She added, “A comprehensive reform package is needed to ensure Egypt rebuilds fiscal buffers, reduces debt-related vulnerabilities, and creates additional space for increased social spending—particularly in health, education, and social protection.”
Approval of the funding under the fourth review still requires the IMF Executive Board’s endorsement. The discussions, which culminated in this agreement, were held in person from November 6 to 20 and later completed virtually.
Egypt is seeking to stabilize its macroeconomic situation after a two-year financial crisis through this loan, which could exceed $57 billion. The plan includes cutting government spending, increasing revenues by selling a range of state-owned assets to investors, and bolstering the private sector.
As part of its reform agenda, the Egyptian government allowed the pound to depreciate by about 40% against the dollar, under what is known as a currency floatation plan. It also raised fuel prices several times this year, lifted subsidies on electricity prices, and reduced bread subsidies.
Last month, there were signs of the government’s withdrawal from direct economic activity: it sold 30% of the United Bank’s shares and announced plans to offer 10 companies, including four military-owned firmsfor public offering or sale to investors over the next year.
Changes to the value-added tax (VAT) are also expected, focusing on removing some exemptions to raise revenues rather than increasing the tax rate.
However, the Egyptian government has acknowledged that taking further steps in the same direction has become more difficult without easing the burden on the population of over 107 million people.
