IMF praises Egypt's economic performance under Stand-by Arrangement

CAIRO – 24 June 2021: Executive Directors of the International Monetary Fund (IMF) praised Egypt’s economic performance under the Stand-by Arrangement.

They commended Egypt’s strong performance under the Stand-by Arrangement, a result of timely policy response to the crisis and steadfast implementation of the program with overperformance in key program targets.

At the same time, Directors cautioned that global uncertainty remains high and encouraged continued efforts to safeguard debt sustainability, strengthen transparency and governance, and undertake structural reforms to build a greener, digital, and more inclusive economy.

According to IMF’s statement, directors lauded the satisfactory performance against the fiscal targets, including spending on health and social protection. Noting the still-high uncertainty, they agreed with the more gradual fiscal consolidation to support the economic recovery. However, given significant risks to debt sustainability, they emphasized the importance of returning to the pre-COVID-19 primary surplus from FY2022/23 onwards. Directors welcomed the medium‑term revenue strategy and the medium-term debt strategy.

They stressed that strong implementation of these strategies, including enhanced revenue mobilization, will be key for lowering the high public debt and gross financing needs while creating space for priority spending. They also underscored the need for continued progress toward greater fiscal transparency, including for state-owned enterprises.

Directors commended the Central Bank of Egypt (CBE) for the monetary policy support to the economy thus far and supported a data-driven approach to monetary policy. Given available policy space and below-target inflation outturns, Directors broadly encouraged the CBE to consider easing if warranted by inflation and economic developments. They emphasized that the monetary policy framework could be further strengthened to support monetary policy transmission. They considered that if subsidized lending facilities were considered necessary for social objectives, they should be defined and supported in the budget rather than implemented through the CBE. Directors noted the strong capital inflows and underscored the importance of exchange rate flexibility as a defense against potential volatility in these flows, and more broadly against external shocks.

Directors noted the resilience of the banking system but observed that continued vigilance was warranted. Noting the system’s high exposure to the sovereign, they welcomed efforts to help diversify banks’ revenue streams and enhance financial inclusion through digital financial technologies and a focus on underserved groups. Directors also welcomed the completion of the restructuring plan for the National Investment Bank, which will reduce fiscal and financial stability risks.

Directors emphasized the importance of deepening and broadening structural reforms to maintain strong medium-term growth. They urged continued efforts to foster private‑sector-led growth—including reducing the role of the state in the economy and leveling the playing field—improving the governance of public institutions, fostering labor market participation of women and youth, and encouraging exports. They also supported ongoing plans to transition to a greener, more digital economy. Directors commended Egypt’s commitment to reach the Sustainable Development Goals by 2030.

It is expected that the next Article IV consultation with the Arab Republic of Egypt will be held on the standard 12-month cycle.