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Monday, 10 May 2021

It’s report card season

The IMF is expected to wrap its second and final review of its year-long USD 5.2 bn standby loan program by the end of June, Finance Minister Mohamed Maait told Bloomberg Asharq. A positive review would unlock the final USD 1.6 bn tranche; Egypt received an initial USD 2 bn in June 2020 and an additional USD 1.6 bn late last year.

How did we do on our first report card? The IMF’s first review last January saw the fund bump up our growth outlook for the year to 2.8% from 2%, with the fund praising Egypt’s fiscal and monetary responses to covid-19. The government’s push for green investments, as well as progress with its structural reform program also got a nod from the IMF. The fund noted a “marginal breach” as Egypt’s inflation fell short of the lower end of the Central Bank of Egypt’s inner target band of 6-12%, triggering a consultation requirement and prompting the CBE to lower and narrow its target range to 5-9%.

The IMF had approved the loan to help Egypt plug a balance of payments shortfall and finance its budget deficit amid covid-19, with the funds put towards supporting healthcare and social programs for the vulnerable, advancing structural reforms, and boosting private sector growth and job creation. Egypt had received a USD 2.8 bn rapid financing facility in May 2020 for targeted and temporary spending to help offset the economic effects of covid-19.

ALSO FROM THE FINANCE MINISTER- Exports this year are expected to outperform their 2020 figures, reducing Egypt’s external financing needs, Maait told Asharq. Egypt saw increased spending on export subsidies in FY2020-2021 — with EGP 1.7 bn spent on subsidies, up from EGP 900 mn, in 1Q2020-2021 which Maait says contributed to a weaker primary surplus.

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