IMF reaches accord with Egypt on $4.8 billion Stand-by Arrangement
An International Monetary Fund (IMF) staff mission headed by Andreas Bauer, Division Chief in the Middle East and Central Asia Department and the Egyptian authorities have reached a staff-level agreement on a 22month Stand-By Arrangement (SBA) in the amount of about US$4.8 billion (equivalent to about SDR 3.16 billion, or 335 percent of Egypt's quota in the IMF).
The SBA will support the government's economic program through fiscal year 2013/14. Egypt's request for an SBA is expected to be submitted to the IMF Executive Board for approval in a few weeks.
Mr. Bauer in Cairo at the conclusion of the staff mission said the Egyptian authorities have developed a national program that seeks to promote economic recovery, address the country's fiscal and balance of payments deficits, and lay the foundation for rapid job creation and socially balanced growth in the medium term.
The policies contained in the authorities' program will help address Egypt's pressing economic and social challenges, and reduce vulnerabilities. The IMF mission welcomes the program and will propose a 22-month SBA in the amount of about US$4.8 billion (equivalent to about SDR 3.16 billion) to support its implementation.
Fiscal reforms are a key pillar under the program. The authorities plan to reduce wasteful expenditures, including by reforming energy subsidies and better targeting them to vulnerable groups.
At the same time, the authorities intend to raise revenues through tax reforms, including by increasing the progressivity of income taxation and by broadening the general sales tax (GST) to become a full-fledged value added tax (VAT).
The resources generated will be used to boost social spending and infrastructure investment, and to gradually reduce the large budget sector deficit from almost 11 percent in 2011/12 to 8.5 percent of GDP in 2013/14, while the budget sector primary deficit will decline from 4 percent in 2011/ 12 to 0.6 percent in 2013/14 and is projected to turn positive in the following fiscal year. The envisaged deficit reduction will help alleviate the public debt burden and free up financing to support social spending and private sector growth. The attainment of the fiscal objectives under the authorities' program will be facilitated by measures to strengthen public financial management and the transparency and accountability of public sector operations.