Egypt and the International Monetary Fund (IMF) have reached a staff-level agreement on a new 46-month Extended Fund Facility (EFF) arrangement of US$3 billion. The new program aims to support Egypt’s economic stability, resilience, and growth amid a challenging global environment.
The new EFF arrangement is a milestone for Egypt’s economic reforms, which have been ongoing since 2016. The program will provide Egypt with balance of payments and budget support, while catalyzing additional financing from Egypt’s international and regional partners. The IMF arrangement is expected to unlock up to US$ 6 billion in FY2022/23, including US$ 1 billion from the newly created Resilience and Sustainability Facility (RSF).
The EFF will also help Egypt address macroeconomic imbalances and spillovers from the war in Ukraine, which have posed significant challenges for the country. The IMF team welcomed the authorities’ recent actions to expand targeted social protection, implement a flexible exchange rate regime, and phase out the mandatory use of letters of credit for import finance.
A Comprehensive and Ambitious Reform Agenda
The EFF will support the authorities’ comprehensive and ambitious reform agenda, which aims to improve the efficiency and progressivity of the tax system, enhance public financial management and transparency, strengthen the governance and competitiveness of state-owned enterprises, and promote private sector-led growth and job creation.
The program will also focus on strengthening the social safety net and improving the quality and accessibility of public services, especially health and education. The authorities have committed to increase spending on health to at least 3 percent of GDP by FY2025/26, and to implement a national health insurance system by FY2027/28. They have also pledged to improve the quality of education and vocational training, and to expand digitalization and financial inclusion.
A Strong Partnership with the IMF
The new EFF arrangement is a testament to the strong partnership between Egypt and the IMF, which dates back to 1945. The IMF has supported Egypt’s economic transformation through various lending arrangements, policy advice, and technical assistance. The most recent arrangement was a 12-month Stand-By Arrangement (SBA) of US$ 5.2 billion, which was successfully completed in June 2021.
The staff-level agreement on the new EFF is subject to approval by the IMF’s Executive Board, which is expected to discuss the authorities’ request in December. The IMF team expressed its appreciation for the constructive and candid discussions with the Egyptian authorities, and its confidence in their ability to implement the program and achieve its objectives.
