Egypt: IMF Executive Board Completes First Review Under the Stand-By Arrangement (Sba) for the Arab Republic of Egypt


Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed today the first review of Egypt's economic reform program supported by a 12-month Stand-By Arrangement (SBA). The completion of the review allows the authorities to draw the equivalent of SDR 1,158.04 million (about US$1.67 billion), bringing total disbursements under the SBA to SDR 2,605.6 million (about US$3.6 billion).

The 12-month SBA in the amount equivalent to SDR 3,763.64 million (about US$5.2 billion at the time of approval, or 184.8 percent of quota) was approved by the Executive Board on June 26, 2020 ( Press Release No. 20/248 ) to support the authorities' economic reform program during the COVID-19 crisis.

Following the Executive Board's discussion on Egypt, Ms. Antoinette Sayeh, Deputy Managing Director and Acting Chair, issued the following statement:

"The Egyptian authorities have managed well the COVID-19 pandemic and the related disruption to economic activity. The proactive measures taken to address health and social needs and to support the sectors most directly affected by the crisis have helped mitigate the economic and human impact. The growth slowdown has so far been less severe than expected with Egypt expected to be among the few countries with positive growth rate this year. External market conditions have also improved with a strong return of portfolio inflows.

"There are still risks to the outlook particularly as a second wave of the pandemic increases uncertainty about the pace of the domestic and global recovery. The high level of public debt and gross financing needs also leave Egypt vulnerable to volatility in global financial conditions. Continued strong policy implementation will further strengthen resilience and help maintain investor confidence.

"Budget execution is on track to achieve the program target for FY2020/21. The existing budget envelope provides sufficient flexibility to accommodate any additional support for vulnerable groups in the event of a second wave of COVID-19, while maintaining the program's fiscal objectives. The envisaged economic recovery should allow public debt to resume its downward trajectory from FY2021/22, and the continued shift toward longer-term debt issuance could mitigate rollover risks. Continued progress on fiscal structural reforms is critical to ensure additional space for high priority spending on health, education, and social protection.

"The Central Bank of Egypt's (CBE) data driven approach to monetary policy has been instrumental to anchor inflation expectations and achieve low and stable inflation. Monetary easing in recent months should further support economic activity and ease appreciation pressures from large capital inflows, which has had a dampening effect on inflation. Two-sided exchange rate flexibility is essential to absorb external shocks and maintain competitiveness.

"The banking system has been resilient thus far, having entered the crisis well-capitalized and with ample liquidity. The CBE's initiatives have helped ensure continued access to credit through the crisis; ongoing financial sector supervision will be critical to maintain the resilience of the banking sector as crisis initiatives begin to expire.

"The government's structural reform agenda is appropriately ambitious. Sustained progress on structural and governance reforms is essential to foster higher, greener, and more inclusive private-sector-led growth. The government's ongoing initiatives to support a green recovery are welcome. Continued focus is needed on reforms to enhance the transparency of state-owned enterprises and to facilitate trade. Timely finalization of a restructuring plan for the National Investment Bank is important for reducing fiscal risks. Finally, ensuring a level playing field for all economic agents and removing bureaucratic obstacles to private sector development will lead to durable improvements in the investment climate and governance."

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