By Asmau Ahmad
The Executive Board of the International Monetary Fund (IMF) has completed the first review of Egypt’s economic reform programme supported by a 12-month Stand-By Arrangement (SBA).
In a press statement issued to newsmen, the IMF said it has allowed Egypt to draw $1.67 billion.
The 12-month SBA for $5.2 billion was approved by the executive board on June 26, 2020, to support the Egyptian authorities’ economic reform programme during the COVID-19 crisis.
The IMF Deputy Managing Director and Acting Chair, Ms Antoinette Sayeh said the Egyptian authorities have managed the COVID-19 pandemic and the related disruption to economic activity very well.
“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,” she remarked.
She noted that 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,” Ms. Sayeh said.
According to the IMF Board, Egypt’s budget execution is on track to achieve the programme target for fiscal year 2020/21.
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 programme’s fiscal objectives.
The IMF statement indicated that 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,” it said.