WASHINGTON, March 30 (KUNA) -- Executive Board of the International Monetary Fund (IMF) completed the first and second reviews of Egypt's Extended Fund Facility arrangement with Egypt and approved an augmentation of the original program by about USD five billion (SDR 3.76 billion).
This enables the authorities to immediately draw about USD 820 million (SDR 618.1 million). Egypt's 46-month EFF arrangement was approved on December 16, 2022.
In completing the review, the Executive Board assessed that all but one of the quantitative performance targets for end-June 2023 were met. The Board approved the authorities' request for a waiver for non-observance of the June performance criterion on Net International Reserves on the basis of corrective actions.
Macroeconomic conditions since the approval of the program have been challenging, with rising inflation, foreign exchange shortages and elevated debt levels and financing needs. The difficult external environment generated by Russia's war in Ukraine was subsequently aggravated by the conflict in Gaza and Israel, as well as tensions in the Red Sea. These developments increased the complexity of macroeconomic challenges and called for decisive domestic policy action supported by a more robust external financing package, including from the IMF.
At the conclusion of the Executive Board's discussion, Ms. Kristalina Georgieva, Managing Director and Chair made the following statement: "Egypt is facing significant macroeconomic challenges that have become more complex to manage given the spillovers from the recent conflict in Gaza and Israel. The disruptions in the Red Sea are also reducing Suez Canal receipts, which are an important source of foreign exchange inflows and fiscal revenue.
"The authorities have significantly strengthened the reform package underlying the Extended Fund Facility arrangement, supported by an augmentation of access. Recent measures toward correcting macroeconomic imbalances, including unification of the exchange rate, clearance of the foreign exchange demand backlog, and significant tightening of monetary and fiscal policies, were difficult, but critical steps forward, and efforts should be sustained going forward.
The authorities' commitment to use a large part of the new financing from the Ras El-Hekma deal to improve the level of reserves, fast-track the clearance of foreign currency backlogs and arrears, and reduce government debt upfront is prudent. (end) rsr.rk