Egypt’s financing gap for FY23/24 at $7B, Institute of International Finance

Cairo – December 17, 2023: Egypt could be facing a $7 billion financing gap for the current fiscal year and a new significant devaluation, according to projections by the Institute of International Finance (IIF).

Foreign direct investment (FDI) and official financial flows will be the primary method of closing this gap, with the IIF emphasizing the significance of external funding in sustaining Egypt's economy, revealed Ashraq Business, citing a report by the IIF.

The institute predicted Egypt’s real GDP grow at 3.3 percent for FY2023/2024, pointing to high inflation, foreign currency shortages, supply bottlenecks, and the ongoing conflict in Gaza as factors that will limit private consumption and exports.

Basing its assumptions on the IMF resuming the disbursement of its $3 billion loan next year, the IIF emphasized the importance of Egypt receiving additional financing from the IMF to mitigate a further decline in its foreign reserves.

A prolonged conflict in Gaza and being unable to close an agreement with the IMF were considered fundamental risks to the IIF’s outlook, which noted that these factors could lead to a wider current account deficit, insufficient external financing, and further decline in foreign currency reserves.

Egypt is currently working on reviving the IMF loan program after two separate reviews were postponed, and has only received one installment. For the past few weeks, multiple news outlets have cited their own sources as stating that Egypt and the fund are in discussions to raise the loan to a potential $10 billion.

In such a scenario, Egypt may resort to additional restrictions on imports, similar to measures implemented in FY2022/2023, such as limited proceeds from smaller privatizations, as well as bilateral financing and debt issuances, the IIF explained.