Following the completion of its third review of Egypt’s extended fund facility (EFF), the International Monetary Fund (IMF) has revised its economic forecast for Egypt, projecting a more positive outlook. The IMF now anticipates a growth rate of 4 percent for the fiscal year 2024/2025, with inflation expected to fall below 15 percent. This adjustment reflects the progress Egypt has made towards economic stability and recovery, as well as its commitment to advancing sustainable development initiatives. The IMF’s mission chief for Egypt, Ivanna Vladkova Hollar, highlighted these achievements during a recent press briefing.
Economic Growth and Inflation Reduction
The IMF’s revised forecast for Egypt’s economic growth is a significant improvement from previous projections. The new growth rate of 4 percent for FY2024/2025 is a positive sign of the country’s economic recovery. This adjustment comes after the IMF had initially predicted a 2.7 percent growth for the same period. The improved outlook is attributed to Egypt’s efforts to restore macroeconomic stability and implement structural reforms.
Inflation, which has been a major concern for the Egyptian economy, is also expected to decline. The IMF projects that inflation will fall below 15 percent, a notable improvement from the current elevated levels. This reduction in inflation is crucial for enhancing the purchasing power of Egyptian citizens and fostering a more stable economic environment. The IMF emphasized the importance of maintaining a flexible exchange rate regime and a liberalized foreign exchange system to avoid external imbalances and support this positive trend.
The IMF’s positive outlook is further supported by ongoing discussions with Egyptian authorities regarding potential access to climate transition financing from the IMF’s Resilience and Sustainability Facility (RSF). These talks underscore Egypt’s commitment to sustainable development and its efforts to address climate-related challenges.
Fiscal Consolidation and Revenue Mobilization
Fiscal consolidation remains a key priority for Egypt as it seeks to create the fiscal space needed to expand social programs and support vulnerable groups. The IMF highlighted the importance of enhancing tax revenues as a critical part of the reform agenda. Strengthening domestic revenue mobilization will enable the government to meet vital spending needs, including investments in health and education.
The IMF’s third review of Egypt’s EFF arrangement also emphasized the need for continued fiscal consolidation efforts. These efforts are essential for placing public debt on a decisive downward path and ensuring that resources are available to support economic growth. The IMF praised Egypt’s progress in meeting fiscal targets, including those related to spending on large infrastructure projects.
Looking ahead, the IMF will continue to work closely with Egyptian authorities to ensure the successful implementation of the reform program. The upcoming fourth review will focus on further enhancing tax revenues and addressing fiscal risks from the energy sector. These measures will help generate the fiscal space needed to expand social spending and support the country’s development goals.
Structural Reforms and Private Sector Growth
Accelerating structural reforms is crucial for raising private sector growth and enhancing Egypt’s economic resilience. The IMF’s review highlighted the progress made in implementing critical structural reforms, but also emphasized the need for greater efforts in this area. Key measures include accelerating the divestment program, streamlining business regulations, and expediting trade facilitation practices.
The IMF stressed the importance of creating a “level playing field” that avoids unfair competitive practices by state-owned companies. By fostering a more competitive business environment, Egypt can attract greater private sector investment and drive economic growth. The IMF also highlighted the need for continued efforts to implement the State Ownership Policy (SOP) and promote transparency in the business sector.
The positive outlook for Egypt’s economy is a testament to the country’s commitment to reform and its efforts to address both domestic and regional challenges. As Egypt continues to implement its reform program, the IMF remains a key partner in supporting the country’s economic development and ensuring a sustainable and inclusive growth trajectory.
