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Egypt’s cabinet approved a proposal to slash spending on state investments and halt new projects until at least July, as the cash-strapped North African country looks to increase the size of its International Monetary Fund rescue package. The cabinet also said new projects would not be started this fiscal year, but projects that are 70 per cent or more complete will be prioritised.
This comes as the International Monetary Fund (IMF) said today it was continuing to engage with Egypt on the policy and financing package that could support moving forward with program reviews under its USD 3 billion loan with the country.
The cabinet decision bars the securing of external financing for new state projects, which will be shelved until the end of the current fiscal year on June 30. National projects that are at least 70% complete and expected to be finished within that period will be prioritized.
The moves, which the government said will help the country better cope with its economic crisis, come as the Middle East’s most populous nation looks to augment a USD 3 billion IMF loan agreed in late 2022. An IMF spokeswoman stated that priorities for Egypt included tightening its monetary and fiscal policies. Egypt’s dollar bonds extended gains after the announcement, with debt due in September 2033 adding 1.2 cents to the dollar.
The new measures include slashing by 15% budget appropriations for some state entities. Authorities also upheld a decision to revoke tax and fee exemptions for those entities — steps that were seen as key to allowing for greater private-sector growth and competition.
Egypt’s central bank is scheduled to meet Thursday to decide on the benchmark interest rate. The majority of economists in a survey expect it to keep the deposit rate at 19.25%.
In October last year, the IMF agreed to grant Cairo the loan, adding that the loan program would include “policies to unleash private sector growth including by reducing the state footprint, adopting a more robust competition framework, enhancing transparency, and ensuring improved trade facilitation”.
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Egypt began seeking a new IMF loan after Russia’s war in Ukraine pushed up its bills for wheat and oil while dealing a blow to tourism from two of its largest markets, Ukraine and Russia
