IMF releases fourth tranche of loan to Egypt

The International Monetary Fund (IMF) has approved the release of funds to Egypt following the fourth review of an emergency loan progamme but has warned the government that “more decisive implementation of reforms will be critical”.

This disbursement of $1.2 billion brings Egypt’s total loan to about $3.2 billion under an extended fund facility (EEF) worth $8bn, the IMF said in a statement.

The Fund approved the 46-month EFF in 2022, after Cairo agreed to implement a set of reforms and policies, including the sale of state assets, to a boost a slowing economy and replenish dwindling foreign exchange reserves.

“Looking ahead, more decisive implementation of reforms will be critical to secure sustained and robust growth,” the IMF said on Tuesday in unusually frank language.

The Fund said that priorities should comprise boosting domestic revenues, improving the business environment, accelerating divestment, and “levelling the playing field, while enhancing governance and transparency”.

Suez Canal revenue, a major source of foreign exchange to Egypt, is down 60 percent or $7 billion, year on year in 2024 as ongoing instability in the Red Sea disrupted global shipping traffic.

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While growth recovered to about 3.5 percent in the first quarter of fiscal 2024/25, the current account deficit widened to 5.4 percent of GDP due to tight expenditure controls, which have more than offset domestic revenue underperformance, the Fund said.

In addition, the IMF approved Egypt’s $1.3 billion loan request under a resilience and sustainability facility. It also approved a request to “recalibrate Egypt’s medium-term fiscal commitments”. The fiscal year 2025/26 begins on July 1.

The IMF’s approval of the fourth disbursement and the resilience and sustainability facility will likely help Egypt roll over $20 billion in domestic treasury bills which mature this month, Reuters reported citing analysts and bankers.