IMF Reaches Agreement with Egypt to Unlock $1.2 Billion in Funding
In a significant development for Egypt’s struggling economy, the International Monetary Fund (IMF) has announced a staff-level agreement aiming to release approximately $1.2 billion in financial assistance. This agreement, which requires approval from the IMF’s Executive Board, comes as Egyptian authorities commit to implementing measures to enhance macroeconomic stability.
Key components of the agreement include an increase in Egypt’s tax-to-revenue ratio by 2% of gross domestic product (GDP) over the next two years and a commitment to speed up the divestment of state-owned enterprises. Ivanna Vladkova Hollar, who led the IMF discussions with Egyptian officials, emphasized the necessity for a comprehensive reform package to restore fiscal resilience, mitigate debt risks, and allow for increased social spending in areas like health, education, and social protection.
Additionally, the two parties recognized the urgent need for reform to improve Egypt’s business climate, calling for decisive actions to reduce state interference in the economy. Such reforms are essential to foster private sector confidence, attract foreign investment, and fully unleash Egypt’s economic potential.
This agreement follows Egypt’s earlier commitment in March to a broader $8 billion loan program from the IMF, contingent upon significant economic reforms. This follows a previous $3 billion, 46-month agreement established in December 2022. As part of these loan conditions, Cairo has allowed its currency to depreciate significantly and has shifted to a market-determined exchange rate.
Egypt faces daunting economic challenges, including soaring inflation and a shortage of foreign currency, exacerbated by declining revenues from the Suez Canal, the Ukraine war, and lingering impacts from the COVID-19 pandemic.
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Photo credit www.aljazeera.com
