IMF Staff Team and Egyptian Officials Reach Staff Agreement on 3rd Egypt Economic Reform Program

The International Monetary Fund (IMF) issued a press release on Thursday announcing that the IMF staff team and the Egyptian authorities have reached a staff-level agreement on the third review of Egypt’s economic reform program.

An International Monetary Fund (IMF) team had visited Egypt from May 2-17 to conduct the third review for Egypt’s reform program, which is supported by a three-year Extended Fund Facility in the form of a $12 billion loan agreed upon in 2016.

In the press release, the IMF said: “The IMF staff team and the Egyptian authorities have reached a staff-level agreement on the third review of Egypt’s economic reform program, which is supported by the IMF’s SDR 8.597 billion (about $12 billion) arrangement," noting that "the staff-level agreement is subject to approval by the IMF’s Executive Board."

"Completion of this review would make available [to Egypt] SDR 1,432.76 million (about US$2 billion), bringing total disbursements under the program to about US$8 billion," the IMF staff team explained.

“Egypt has begun to reap the benefits of its ambitious and politically difficult economic reform program. While the process has required sacrifices in the short-term, the reforms were critical to stabilize the economy and lay the foundation for strong and sustained growth that will improve living standards for all Egyptians," according to the press release

. “Egypt’s growth has continued to accelerate during 2017/18, rising to 5.2 percent in the first half of the year from 4.2 percent in 2016/17," the IMF staff team said.

The team also determined that the "current account deficit has also declined sharply, reflecting the recovery in tourism and strong growth in remittances, while improved investor confidence has continued to support portfolio inflows."

The staff team also praised the monetary policy carried out by the Central Bank of Egypt.

“Annual headline inflation has declined from 33 percent in mid-2016 to around 13 percent in April, anchored by the well-calibrated monetary policy of the Central Bank of Egypt (CBE)," the staff team said.

The report expected that Egypt would "achieve a primary budget surplus excluding interest payments in 2017/18, with general government debt as a share of GDP expected to decline for the first time in a decade. The budget for 2018/19 targets a primary surplus of 2 percent of GDP, which would keep public debt on a firmly downward path."

“The government continues to move forward with structural reforms to modernize the economy and tap the potential of Egypt’s growing population." the report said.

The IMF staff team stressed that “strengthening the social safety net remains a top priority for the Egyptian authorities and is strongly supported by the IMF."

"We welcome the plan to further expand the “Takafol” and “Karama” programs to help protect Egypt’s most vulnerable.

The school meals program for children as well as expansion of child care centers also aim to increase women’s participation in the labor force, which will be essential to sustaining strong and inclusive growth over the medium term," the staff team concluded.