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RIYADH: Egypt will potentially have access to around $1.2 billion from the International Monetary Fund, following a staff-level agreement under the Extended Fund Facility.  

The agreement, which is subject to approval by the IMF’s Executive Board, aims to provide crucial financial support as Egypt navigates a challenging economic landscape. 

The funding is part of Egypt’s broader efforts to stabilize its economy amidst high inflation and lower-than-expected revenues, including a decline in Suez Canal earnings. 

“The Egyptian authorities have continued to implement key policies to preserve macroeconomic stability, despite ongoing regional tensions that are causing a sharp decline in Suez Canal receipts,” said Ivanna Vladkova Hollar, who led the IMF mission to Egypt.  

The country incurred losses of $8 billion due to a sharp decline in Suez Canal revenues, as revealed by Egyptian Foreign Minister Badr Abdelatty last month. 

The IMF and Egyptian authorities have agreed to recalibrate the country’s fiscal consolidation path, creating fiscal space for critical social programs targeting vulnerable groups and the middle class, while ensuring long-term debt sustainability. 

“Particular attention will be needed to contain fiscal risks stemming from state-owned enterprises in the energy sector, and to enforce the strict implementation of the public investment ceiling, which includes capital expenditures associated with public entities that operate outside the general government budget,” added Holler.  

She praised Egypt’s plans to streamline and simplify its tax system but stressed that additional reforms are necessary to boost domestic revenue mobilization. 

As part of the agreement, Egypt committed to increasing its tax-to-revenue ratio by 2 percent of gross domestic product over the next two years, focusing on eliminating exemptions rather than raising taxes. 

“A comprehensive reform package is needed to ensure that Egypt rebuilds fiscal buffers to reduce debt vulnerabilities, and generates additional space to increase social spending, especially in health, education and social protection,” she said.  

Looking ahead, Egypt’s reform priorities involve boosting domestic revenues, improving the business environment, accelerating divestment, leveling the playing field, and enhancing governance and transparency.

“While Egypt faces headwinds from the difficult external environment, there was agreement that further efforts were needed to accelerate the divestment program. The authorities expressed commitment to redouble their efforts in this area, which is crucial to support private sector development and to reduce the high debt burden,” added Holler.

Earlier this month, Fitch Ratings downgraded Egypt’s economic growth forecast to 3.87 percent for the fiscal year 2024/25, down from 4.2 percent, citing disruptions in Suez Canal navigation. 

The rating agency projected a recovery in the financial year 2025/26, with growth accelerating to 5.1 percent, up from an earlier estimate of 4.7 percent, contingent on normalizing Red Sea navigation and improved performance in the services sector amid easing geopolitical tensions.

RIYADH: ��������Ƶ’s National Debt Management Center has successfully concluded its riyal-denominated sukuk issuance for December, raising SR11.59 billion ($3.09 billion).

This marks a substantial 239.88 percent increase from the previous month, when the Kingdom raised SR3.41 billion in sukuk. ��������Ƶ had raised SR7.83 billion in October and SR2.6 billion in September.

Sukuk, which are Shariah-compliant Islamic bonds, provide investors with partial ownership of the issuer’s assets until the bonds mature. The rise in sukuk issuance aligns with positive global market projections.

A Moody’s report released in September forecasted that the global sukuk market would remain robust in 2024, with total issuance expected to reach between $200 billion and $210 billion, an increase from just under $200 billion in 2023.

The December sukuk issuance by NDMC was structured into four tranches, each with varying maturities. The largest tranche, valued at SR5.58 billion, is set to mature in 2027. Another tranche, worth SR3.90 billion, will mature in 2029, while a third tranche, valued at SR706 million, is due for repayment in 2031. The final tranche, amounting to SR1.4 billion, will mature in 2034.

This surge in sukuk issuance comes as the Kingdom is expected to lead the Gulf Cooperation Council region in bond and sukuk maturities between 2025 and 2029.

A report by Kamco Invest, released earlier this month, projected that ��������Ƶ’s total bond and sukuk maturities during this period would reach $168 billion, with government-issued bonds and sukuk accounting for $110.2 billion of that total.

In December, Fitch Ratings also highlighted that the GCC debt capital market crossed the $1 trillion threshold in outstanding debt by the end of November.

Earlier in October, Fitch had noted that the growth in sukuk issuance was driven by improving financing conditions, especially after the US Federal Reserve’s rate cut to 5 percent in September. Looking ahead, Fitch expects interest rates to decline further, reaching 4.5 percent by the end of 2024 and 3.5 percent by the end of 2025, which is likely to spur more sukuk issuances in the short term.