The International Monetary Fund (IMF) has announced a staff-level agreement with Egypt concerning the third review of its extended loan program.
This agreement will unlock approximately $820 million for Cairo, pending approval from the IMF Executive Board.
The agreement follows an IMF mission to Cairo from May 12 to 26, which assessed Egypt’s reform progress under the “Extended Fund Facility.”
In its statement, the IMF noted that Egypt is making some progress in restoring macroeconomic stability despite the challenging regional environment, including the impacts of the Gaza conflict and disruptions in Red Sea shipping, which have negatively affected Suez Canal revenues.
Vladkova Hollar, the IMF mission chief, stated, “While geopolitical tensions and their impact on Egypt remain challenging, the authorities are continuing their efforts to maintain macroeconomic stability through fiscal discipline, tight monetary policy, and a transition to a flexible exchange rate system.”
She added, “These efforts have started to yield better outlooks and improved availability of foreign currencies, with inflation beginning to slow down and signs of recovery in private sector sentiment.”
Hollar emphasized that Egypt needs to maintain prudent fiscal policies and a tight monetary stance to keep inflation under control.
Initially set at $3 billion in December 2022, the loan was expanded to $8 billion in March 2024.
The fund agreed to expand the scope of the agreement after Egypt’s struggling economy was further impacted by the war in Gaza, which slowed tourism growth and prompted Houthi attacks in the Red Sea.
This led to a halving of the Suez Canal revenues, a major source of foreign currency for Egypt alongside tourism and shipping.
The IMF Executive Board also announced the completion of the first and second reviews under Egypt’s Extended Fund Facility. The statement mentioned, “The challenging external environment created by Russia’s war in Ukraine was further exacerbated by the war in Gaza, as well as tensions in the Red Sea.”
