The IMF and Egypt finalize staff-level talks on the fourth review of an $8 billion economic program, offering hope amid inflation and currency crises.
The International Monetary Fund (IMF) announced on Wednesday that it has reached a staff-level agreement with Egypt for the fourth review under its $8 billion Extended Fund Facility program. The agreement, subject to approval by the IMF’s executive board, could unlock a $1.2 billion disbursement to support Egypt’s struggling economy.
Egypt, which secured the 46-month program in March, has faced mounting economic pressures, including soaring inflation and a persistent shortage of foreign currency. These challenges have been compounded by a significant decline in Suez Canal revenues, attributed to geopolitical tensions that have disrupted trade flows in the region over the past year.
To address its fiscal challenges, Egypt has committed to increasing its tax revenue by 2% of its gross domestic product (GDP) over the next two years. This effort will focus on eliminating tax exemptions rather than introducing new taxes, a strategy designed to create fiscal space for expanded social welfare programs targeting the nation’s most vulnerable groups.
In a statement, the IMF commended Egypt’s efforts to streamline and simplify its tax system but underscored the importance of deeper reforms to enhance domestic revenue generation. The organization also emphasized the need for the Egyptian government to accelerate private sector-led growth, describing it as essential to fostering sustainable economic development. Egypt reaffirmed its commitment to a flexible exchange rate, a policy viewed as critical for attracting investment and stabilizing the financial system.
The staff-level agreement represents a significant step forward in Egypt’s efforts to navigate its economic crisis. However, the IMF’s executive board must still approve the deal before any funds are disbursed. The disbursement would provide much-needed relief as Egypt seeks to stabilize its economy and rebuild confidence among investors and international partners.
This development highlights the country’s commitment to implementing fiscal reforms and addressing structural economic issues while navigating the social and economic pressures facing its population.