Egypt Undergoes IMF Fifth Review Loan Program
Taarek Refaat
Egypt is currently undergoing the fifth review of its International Monetary Fund (IMF) loan, a significant milestone in the implementation of the IMF-supported economic reform program, as part of its ongoing efforts to enhance economic stability and achieve sustainable growth.
Through the review, the IMF assesses Egypt's commitment to implementing economic policies, in preparation for making critical decisions regarding new loan disbursements. At the same time, these reforms raise numerous questions about their social and economic impact, especially in light of the current challenges facing the country.
The review addresses several issues, including the state's withdrawal from certain activities and the cessation of crowding out the private sector, allowing it to play a greater role in economic activity, thus alleviating the burden of government debt. The issue of exchange rate flexibility is also a constant topic in discussions between the Egyptian government and the IMF, along with tax and institutional reforms.
The fifth review comes within the framework of the program signed with the IMF. The IMF approved the disbursement of the fourth tranche of the loan, valued at $1.2 billion, in early April, following the Board of Executive Directors' approval of the results of the fourth review of Egypt's economic reform program.
The International Monetary Fund (IMF) sees two major problems threatening social stability in Egypt: inflation, which impacts the most vulnerable groups, and the lack of job opportunities, which impacts the middle class, Jihad Azour, Director of the IMF's Middle East and Central Asia Department, told Asharq Al-Awsat in early May. According to Azour, the IMF, through its program for Egypt, aims to raise growth levels, engage the private sector more actively in economic activity, and address the inflation problem.
The IMF recently raised its forecast for real GDP growth in Egypt by 0.2 percentage points for the current and next years, while lowering its growth estimates for the Middle East and North Africa region as a whole for both years.
The IMF also called on Egypt in early May to exercise caution in its approach to interest rate cuts, given the global uncertainty resulting from US President Donald Trump's recent decisions regarding tariffs.
Egypt cut interest rates last month for the first time in nearly five years, after annual inflation fell to 13.6%, less than half of its peak in September 2023.
In March 2024, the Central Bank of Egypt raised interest rates to a record low, coinciding with a more than 40% devaluation of the Egyptian pound. The rate remained unchanged until last month's 225 basis point cut to 25%.
Egypt's domestic market saw foreign outflows of more than $1 billion in April, according to Goldman Sachs estimates, after Trump announced new tariffs, sparking global financial turmoil.
The Egyptian pound hit record lows following the developments before paring some of its losses. Egypt is subject to the minimum US tariff rate of 10%. Despite the recent cut, the real interest rate—adjusted for inflation—remains among the highest globally, at around 11.5%.
The Egyptian economy grew during the second quarter of the current fiscal year (2024/2025) at its fastest quarterly rate in more than two years, at 4.3%, supported by the manufacturing and tourism sectors, despite continued declines in Suez Canal revenues due to tensions in the Red Sea.
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