Arab Republic of Egypt

Adequately tight monetary and fiscal policies, together with exchange rate flexibility, have helped restore macroeconomic stability. However, limited progress on deeper reforms, especially the stalled divestment agenda, continues to weigh on medium-term growth, keeps gross financing needs high, and constrains fiscal space for priority social spending, putting key program objectives at risk. With less than a year remaining under the program, the scope for corrective action is increasingly narrow. The authorities’ planned reforms to reduce the state footprint and level the playing field, adopt a more comprehensive active debt management strategy, and strengthen risk management in state-owned banks are necessary steps toward advancing the program’s objectives.