The IMF executive board approved a 12-month Stand by Arrangement (SBA) with the access of about $5.2 billion to help Egypt address balance of payment to finance COVID-19 needs.
The Fund-supported program aims at helping Egypt cope with challenges posed by the COVID-19 pandemic by providing Fund resources to meet the country’s balance of payments needs and to finance the budget deficit.
The approval of the SBA enables the immediate disbursement of about $2 billion while the remainder will be phased over two reviews.
The SBA will also help support the government’s efforts to preserve the macroeconomic achievements made over the past four years and advance key structural reforms.
The advanced structural reforms will help improve governance and transparency, strengthen the frameworks for public finances, reduce hindrance to competition to move towards sustainable and inclusive private sector growth and support health and social spending to protect vulnerable groups.
In 2016 to 2019, Egypt successfully completed a home-grown economic reform program supported by the IMF’s Extended Fund Facility. Prior to the pandemic, Egypt was one of the fastest-growing emerging markets, however, global and domestic disruptions have worsened the economic outlook and reshuffled policy priorities.
The authorities’ economic policy framework, supported by the SBA, aims to maintain Egypt’s macroeconomic stability with priorities to anchor inflation expectation and safeguard financial stability while maintaining a flexible exchange rate, protect necessary social and health spending while avoiding an excessive build-up of public debt and implement key structural reforms to strengthen transparency, governance and competition.
“Over the past few years, Egypt saw strong growth, falling unemployment, moderate inflation, the buildup of strong reserve buffers, and a significant reduction in public debt. The authorities were looking to broaden and deepen structural reforms begun under the Extended Fund Facility, but the COVID-19 pandemic has temporarily refocused government priorities to address the economic and health crisis. The government has responded decisively to the crisis with a comprehensive package that supports health care needs, the economy, and the most affected individuals and sectors. The Central Bank of Egypt has also taken several actions to support economic activity and borrowers” said Ms Antoinette Sayeh, IMF Deputy Managing Director and Acting Chair.