The International Monetary Fund (IMF) has released a long-awaited report on Egypt’s progress under its $8 billion loan agreement, indicating mixed results on structural reforms. A primary concern highlighted is the continued dominance of the public sector in the economy.
The IMF noted that Egypt has made limited headway in reducing the influence of state- and military-owned businesses. These entities benefit from preferential treatment, including tax breaks, access to prime land, and inexpensive labor, and largely operate without public scrutiny, offering very little transparency regarding their financial health.
The report also states that Egypt’s reliance on a state-led growth model, characterized by large-scale projects and public investments, is hindering job creation and suppressing the private sector, especially in the current volatile global climate. This approach has led to a large informal economy and insufficient protection against growing global financial, geopolitical, and climate-related shocks.
The report, published on Tuesday, comes four months after the IMF board approved a $1.2 billion disbursement, bringing the total disbursed to approximately $3.5 billion. The 46-month loan facility was initiated in March 2024 to address severe foreign currency shortages and high inflation. The IMF recently announced it would combine the fifth and sixth program reviews to give Egypt more time to implement crucial reforms.
Looking ahead, the IMF forecasts Egypt’s external debt to rise from $162.7 billion in 2024/25 to $202 billion by 2029/30. The fund also warned that overall public debt presents a high risk of sovereign stress. To mitigate this, the IMF urged Egyptian authorities to broaden the tax base, eliminate untargeted subsidies, and increase oversight of off-budget entities like the state oil company EGPC and the urban development authority NUCA.
The report also acknowledged that “persistent and successive external shocks” have complicated policy execution. These include the war in Sudan, which has resulted in an influx of refugees into Egypt, and trade disruptions in the Red Sea, which led to a $6 billion reduction in foreign exchange inflows from the Suez Canal last year.
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