Arab Republic of Egypt: Third Review Under the Extended Arrangement Under the Extended Fund Facility, Monetary Policy Consultation Clause, Requests for Waivers of Nonobservance of a Performance Criterion and Applicability of Performance Criteria, and

This paper presents Arab Republic of Egypt’s Third Review under the Extended Arrangement under the Extended Fund Facility (EFF), Monetary Policy Consultation Clause, Requests for Waivers of Nonobservance of a Performance Criterion and Applicability of Performance Criteria, and Request for Modification of Performance Criteria. The Egyptian authorities’ recent efforts to restore macroeconomic stability have started to yield positive results. Inflation remains elevated but is coming down. A flexible exchange rate regime remains a cornerstone of the authorities’ program. However, the regional environment remains difficult, and complex domestic policy challenges require decisive implementation of the authorities’ reform program. Continued fiscal consolidation, with strengthened revenue mobilization, to create the space needed to expand social programs. Meaningfully advancing with the structural reform program would significantly improve growth prospects. Managing the resumption of capital inflows prudently will also be important to contain potential inflationary pressures and limit the risk of future external pressures.