Egypt has reached a staff-level agreement with the International Monetary Fund (IMF) that is expected to unlock an additional $1.2 billion from the country’s $8 billion loan. The IMF announced the preliminary deal on Tuesday, noting that it is still subject to approval by the lender’s executive board.
The agreement is seen as a key milestone in Egypt’s ongoing efforts to stabilize its economy under a 46-month program, part of a broader $57 billion bailout package. The program aims to restore macroeconomic stability following a two-year financial crisis, marked by significant depreciation of the Egyptian pound and soaring inflation.
The IMF outlined several reform priorities for Egypt, including boosting domestic revenues, improving the business climate, accelerating asset divestment, and enhancing governance and transparency. These measures are designed to promote economic growth and attract foreign investment.
Egypt’s fiscal adjustments have included raising revenue through the sale of state assets, cutting government spending, and allowing the pound to weaken by approximately 40% against the dollar. In addition, the government has implemented multiple price hikes on fuel, electricity, and subsidized bread.
Despite these measures, the government has warned that further reforms may be increasingly difficult to implement without exacerbating the strain on its population of over 107 million people, the largest in the Middle East.
The exchange rate remains a key issue, with the pound falling to a record low of 51 to the dollar this week. The depreciation has been partly attributed to the redemption of short-term Treasury bills issued earlier in the year. As part of the ongoing IMF program, maintaining a flexible exchange rate remains a key target for the government.
November saw some progress on Egypt’s divestment program, with the sale of a 30% stake in United Bank, a state-owned financial institution. The government has announced plans to offer at least 10 additional assets to strategic investors or the stock market next year, including several linked to the military.
Looking ahead, discussions are also underway regarding potential changes to Egypt’s value-added tax (VAT) system, with officials considering the cancellation of some exemptions rather than raising the rate.
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