The Washington, DC-based lender said Cairo had agreed to increase the tax-to-revenue ratio and accelerate the divestment of state-owned companies.
The International Monetary Fund (IMF) has announced that it has reached an agreement with Egypt to release around $1.2 billion in funds to support the country’s struggling financial situation.
The Washington, D.C.-based lender said Tuesday it had reached the “employee-level agreement” that requires board approval after Cairo outlined steps to improve macroeconomic stability.
Egyptian authorities agreed, among other things, to increase the tax rate by two percent of gross domestic product (GDP) over the next two years and accelerate the divestment of state-owned companies, the lender said.
“A comprehensive reform package is needed to ensure that Egypt rebuilds its fiscal buffers to reduce debt vulnerability and creates additional scope to increase social spending, particularly in the areas of health, education and social protection,” said Ivanna Vladkova Hollar, the Authorities led the IMF’s talks with Egypt.
The two sides also agreed that reforms need to be accelerated to improve the business environment, Hollar said.
“In this regard, more determined efforts are needed to level the playing field, reduce the influence of the state on the economy and increase the confidence of the private sector to help Egypt attract foreign investment and develop its full economic potential.” , she said.
Egypt reached an agreement in March to receive an $8 billion loan from the IMF in tranches, subject to the implementation of economic reforms, expanding a $3 billion contract concluded in December 2022 with a term of 2022 46 months.
As part of the terms of the loan, Cairo agreed to allow its currency to be sharply devalued and to let market forces determine the exchange rate.
Egypt is grappling with double-digit inflation and a foreign currency shortage amid economic challenges such as a collapse in Suez Canal revenues, the war in Ukraine and the fallout from the COVID-19 pandemic.
