Approval of Egypt's IMF programme review faces possible delay, sources say

The IMF may merge its fifth and sixth reviews of Egypt's $8 billion support programme because of slow progress on structural reforms, possibly delaying a new disbursement by half a year, three people with knowledge of discussions told Reuters on Tuesday.

The International Monetary Fund approved its fourth review of the programme in March, unlocking a disbursement of $1.2 billion. An IMF team arrived in Egypt in May to begin the fifth review but has yet to signal its approval, the sources said.

The 46-month facility was first signed in March of 2024 following more than a year of severe foreign currency shortages and inflation that peaked at 38% in September 2023.

The IMF has so far paid out about $3.5 billion under the fund, according to Reuters calculations.

However, it has been displeased with Egypt's slow progress on structural reforms that are the centrepiece of the facility, including the divestment of state assets, one of the sources said. Egypt failed to reach half of its structural benchmarks in its last two reviews, the first source added.

Financial reforms have progressed relatively smoothly.

A finance ministry spokesperson had no immediate comment. The central bank did not immediately respond to a request for comment.

A delay in the fifth review would result in the programme being stalled until after the summer, with the next board meeting likely in December at the earliest.

The IMF has yet to publish a staff report from the fourth review. Egypt asked for a delay to give it time to release details of measures to widen the tax base, the first source said.

On Sunday, parliament approved expanding value-added tax, which will mean higher taxes on construction and contracting services, crude oil, cigarettes and alcohol.

That could trigger the release of the IMF staff report, the first source said.