IMF Concludes Fortnight Mission for Egypt’s EFF 4th Review

An International Monetary Fund (IMF) mission led by Ivanna Vladkova Hollar wrapped up in-person discussions with Egyptian authorities in Cairo regarding the fourth review of Egypt's $8 billion Extended Fund Facility (EFF) programme, following a visit from 6 to 20 November, the fund announced.

The IMF said the discussions marked significant progress toward completing the fourth review under the Extended Fund Facility (EFF), alongside consultations on Egypt's medium-term economic challenges and opportunities.

By announcing this action, the outcomes of the fourth review discussions will be submitted to the IMF’s board of directors to schedule Egypt on its meetings calendar for the completion of this review. Once approved, Egypt will be eligible to receive a tranche of $1.3 billion.

At the conclusion of the visit, Hollar issued a statement highlighting the productive talks and focusing on several key areas, including Egypt's ongoing reform efforts and the broader geopolitical and economic challenges facing the country.

"The Egyptian authorities and IMF staff have made substantial progress on policy discussions, including additional measures to reduce macro-critical risks tied to climate change. This is part of Egypt’s request to access the Resilience and Sustainability Facility (RSF)," Hollar stated.

"However, the region’s geopolitical tensions, particularly the conflicts in Gaza and Israel, continue to cast a shadow over Egypt’s economic outlook, with disruptions in trade and a dramatic decline in Suez Canal receipts—a critical source of foreign currency—affecting the country's economy,” Hollar pointed out.

According to Hollar, despite these challenges, including increased refugee inflows straining public services, Egypt has taken significant steps to maintain macroeconomic stability.

These include unifying the exchange rate since March, alleviating foreign exchange demand pressures and easing imports.

The Central Bank of Egypt (CBE) has also emphasized its commitment to a flexible exchange rate regime, which aims to buffer the economy from external shocks.

She also asserted that monetary tightening has been a key tool in curbing inflationary pressures, though rising administrative prices have temporarily hindered progress.

Moreover, Hollar noted that the IMF mission stressed the importance of maintaining a firm downward trend in inflation toward medium-term targets, alongside continued fiscal discipline to reduce public sector debt vulnerabilities.

The CBE is scheduled to review the key interest rates on Thursday in its penultimate meeting for 2024. This year, the central bank raised them by eight percent (800 bps).

The IMF also clarified that Egypt's economic growth would depend on the private sector as the main engine for future expansion.

The mission encouraged the authorities' comprehensive plans to streamline the tax system, improve customs procedures, and facilitate trade.

It also called for accelerating the country’s divestment plans.

This would reduce the state's footprint in the economy and promote a more competitive, private-sector-driven environment.

Hollar indicated that tax policy reforms were also a focal point of the discussions, with the IMF supporting measures to widen the tax base, reduce exemptions, and improve tax equity.

“These reforms are seen as essential to mobilizing domestic revenues, creating fiscal space to finance vital programs in sectors such as health, education, and the social safety net, all while reducing debt and its associated service costs,” the mission chief stated.

Additionally, she revealed that the IMF and Egyptian authorities agreed on the importance of strengthening the social safety net, particularly the conditional cash transfer programme, to protect vulnerable populations amid rising living costs and energy price hikes.

The discussions are set to continue in the coming days to finalize agreements on remaining policies and reforms, which will be key to the successful completion of the fourth EFF review, according to the fund’s statement.