Egypt to draw $1.67bn under SBA as IMF completes first review of reform plan

Nehal Samir
4 Min Read

The Executive Board of the International Monetary Fund (IMF) completed, on Saturday, the first review of Egypt’s economic reform programme supported by a 12-month Stand-By Arrangement (SBA). The completion of the review allows the Egyptian authorities to draw SDR 1.158bn (equivalent to about $1.67bn), bringing total disbursements under the SBA to SDR 2.605bn (about $3.6bn).

The 12-month SBA, totalled SDR 3.763bn (about $5.2bn at the time of approval), was approved by the IMF Executive Board on 26 June 2020 to support the authorities’ economic reform programme during the COVID-19 crisis.

“The Egyptian authorities have managed well the COVID-19 pandemic and the related disruption to economic activity. 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. 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,” said Antoinette Sayeh, Deputy Managing Director and Acting Chair of IMF.

“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,” Sayeh added.

“Budget execution is on track to achieve the program target for FY 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 program’s fiscal objectives. The envisaged economic recovery should allow public debt to resume its downward trajectory from FY 2021/22, 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,” she added.  

Sayeh said that 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. Monetary easing in recent months should further support economic activity and ease appreciation pressures from large capital inflows, which have had a dampening effect on inflation. Two-sided exchange rate flexibility is essential to absorb external shocks and maintain competitiveness.

She said that the banking system has been resilient thus far, having entered the crisis well-capitalized and with ample liquidity. The CBE’s initiatives have helped ensure continued access to credit through the crisis; ongoing financial sector supervision will be critical to maintain the resilience of the banking sector as crisis initiatives begin to expire.

“The government’s structural reform agenda is appropriately ambitious. Sustained progress on structural and governance reforms is essential to foster higher, greener, and more inclusive private-sector-led growth. The government’s ongoing initiatives to support a green recovery are welcome. Continued focus is needed on reforms to enhance the transparency of state-owned enterprises and to facilitate trade. Timely finalization of a restructuring plan for the National Investment Bank is important for reducing fiscal risks. Finally, ensuring a level playing field for all economic agents and removing bureaucratic obstacles to private sector development will lead to durable improvements in the investment climate and governance.” Sayeh concluded.


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