At some point, most people will likely have seen or received a school report that reads something along these lines: “Commendable progress but has the potential to do better.”. That was roughly the gist of the long awaited — and much delayed — International Monetary Fund (IMF) staff report review of the $8 billion loan agreement it has with Egypt. That loan had supposedly been to help Egypt’s economy get back on its feet, after it had taken successive beatings from a series of external shocks, among them the COVID-19 pandemic and the Russian full-scale invasion of Ukraine. Those shocks had hacked away at the progress the economy had made since its earlier IMF loan in 2016. The 2016 loan followed a particularly difficult period for Egypt’s economy. The impact of the January 2011 revolution was brutal: growth rates plunged from 7.1% a mere three years earlier to 1.8%, unemployment saw a corresponding rise, and investment rates fell. The next two years saw additional domestic and international trouble, and in 2016, Egypt reached a deal with the IMF, which agreed to a $12 billion loan. That program was declared a success, as Egypt stabilized its macroeconomic indicators, accelerated growth, and rebuilt its foreign currency reserves. Admittedly, it came at a steep domestic cost; IMF programs often necessitate cutting away more than just fat — poverty rates in Egypt rose to 5%, up from 2.6% four years earlier. A bigger problem, however, was that the program set in motion a chain of events that, in effect, led to the IMF becoming as much of a problem for Egypt as it was an aid. Egypt has never defaulted on a loan, but it needed to keep borrowing to support its huge import bill and to service the loans. Taking into account the state’s spending on large infrastructure projects intended to attract investment, the economy had to furiously chase opportunities just to keep from stalling, and by 2022, Egypt had to go back to the IMF for another agreement.
Egypt passes its fourth IMF review (Mirette F. Mabrouk – Middle East Institute)
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