The International Monetary Fund’s (IMF) Executive Board approved on Saturday immediate disbursement of the equivalent of Special Drawing Right (SDR) 1.4bn (about $2bn), under a 12-month Stand-by Arrangement (SBA) for Egypt, worth SDR 3.76bn (about $5.2bn or 184.8% of quota).
The remainder of the SBA loan will be phased over two reviews.
The new arrangement aims to help Egypt cope with the challenges posed by the novel coronavirus (COVID-19) pandemic. It provides IMF resources to meet the country’s balance of payments needs and to finance the budget deficit.
The IMF-supported programme would also help the Egyptian authorities preserve the achievements made since 2016, and go towards supporting health and social spending to protect vulnerable groups. The finance package will help advance a set of key structural reforms to put Egypt on a strong footing, ensuring its sustained recovery with expanded and more inclusive growth and job creation over the medium term.
In a press statement, the IMF said that Egypt has proven to be one of the fastest growing emerging markets prior to the coronavirus outbreak. The country has a strong track record of successfully completing a home-grown economic reform programme between 2016 and 2019, supported by the IMF’s Extended Fund Facility.
The IMF statement noted, however, that the significant domestic and global disruptions from the pandemic have worsened economic outlook and reshuffled policy priorities.
“The authorities’ economic policy framework, supported by the SBA, aims to maintain Egypt’s macroeconomic stability with priorities to: protect necessary social and health spending while avoiding an excessive build-up of public debt; anchor inflation expectation and safeguard financial stability while maintaining a flexible exchange rate; and implement key structural reforms to strengthen transparency, governance, and competition,” the IMF said.
“The new Stand-By Arrangement, together with recent RFI, supports the authorities’ ongoing efforts to mitigate the economic and social impact of the crisis, while maintaining macroeconomic stability and safeguarding past achievements,” IMF Deputy Managing Director Antoinette Sayeh said. “Together with the support of Egypt’s development partners, disbursements from the SBA will help address large financing needs.”
“Policies supported by the SBA will focus on addressing the immediate crisis needs including critical spending on health, social programmes to protect the most vulnerable, and assist directly affected sectors while safeguarding medium-term fiscal sustainability, anchoring inflation expectations, and preserving exchange rate flexibility,” Sayeh added. “Structural reforms will aim to continue strengthening the frameworks for public finances, improve governance and transparency, and reduce barriers to competition to ensure a path towards sustainable and inclusive private sector-led growth.”