The Egyptian government said the Central Bank had spent EGP500 million ($31.95 million) from an allocated 20 billion Egyptian pounds ($1.28 billion) to support the stock exchange and mitigate the effects of the coronavirus pandemic on the country’s economy.
“Exceptional financial sector measures, taken in response to the COVID-19 outbreak - including but not limited to the [Central Bank of Egypt’s] stock purchase program - will be rolled back when conditions allow,” the government said.
In March, Cairo said it will allocate EGP20 billion ($1.27 billion) to support the stock exchange after share prices were battered by the economic impact of the pandemic.
“The growth impact of the COVID-19 crisis has so far been less severe than expected, as strong consumption helped offset weak tourism and investment,” the IMF said in the first review of Egypt’s latest stand-by arrangement.
The fund said Egypt has managed well the COVID-19 pandemic and the related disruption to economic activity by adopting proactive measures to address health and social needs and support the sectors most directly affected by the crisis.
After completing its first review of Egypt’s economic reform program in December 2020, supported by a 12-month Stand-By Arrangement (SBA), the IMF Executive Board allowed authorities to draw $1.67 billion, bringing total disbursements under the SBA to about $3.6 billion.
“The Central Bank of Egypt’s (CBE) data-driven approach to monetary policy has been instrumental to anchor inflation expectations and achieve low and stable inflation,” the fund noted.
“The banking system has been resilient thus far, having entered the crisis well-capitalized and with ample liquidity.”
“The CBE’s initiatives have helped ensure continued access to credit through the crisis,” it added.
It pointed out that consumption remained relatively robust, however, supporting modest growth in most other sectors.
“The decline was much less than projected at SBA approval in June, resulting in growth of 3.6 percent in FY2019/20 compared to the projected two percent,” it said.
The unemployment rate declined in Q3 of 2020 to 7.3 percent, accompanied by an increase in labor force, down from 9.6 percent in the previous quarter, the fund explained.
It added that a primary fiscal surplus of 1.8 percent of GDP also beat expectations, reflecting savings on energy subsidies from lower oil prices and lower-than-planned transfers to the social insurance fund.