Egypt’s 50% Increase In IMF Share: What Does It Mean

January 13, 2025

 

President Abdel Fattah El-Sisi approved a bill to increase Egypt’s share in the International Monetary Fund (IMF) by 50% on January 9, part of a broader decision by the IMF’s General Assembly to raise the quotas of all member countries by 50%.

This decision, formalized through Presidential Decree No. 247, also includes the reservation of the right to ratify, according to the Egyptian Gazette.

Lower borrowing costs

Moataz Yeken, chief economist at Lynx Strategic Business Advisors, told Business Monthly that Egypt’s increased IMF share will allow the country to access a larger borrowing limit without higher costs. This increase reduces the risk of exceeding its borrowing ceiling, which would otherwise lead to higher fees, and enables Egypt to secure larger loans to support its ongoing economic reforms.

“This move is aimed at helping Egypt avoid additional costs associated with borrowing beyond its allocated share,” he explained.

He noted that each member country has a borrowing limit based on its share in the fund, and exceeding this limit leads to additional costs.

The quota increase is part of the IMF’s regular general quota review process. According to Yeken, during its 16th review, the IMF determined that it needed more capital to maintain financial sustainability. As a result, all member countries, including Egypt, agreed to raise their shares.

Yeken explained, “All IMF members will increase their contributions by 50%, which means Egypt’s contribution will remain at the same level. This is known as ‘pro rata,’ where each country’s contribution rises proportionally to its original share, keeping the percentage of each country’s contribution unchanged.”

While the increase offers immediate benefits, Yeken cautioned that risks remain. The primary concern would be if Egypt struggles to meet its repayment obligations in the future. However, he considers this scenario highly unlikely.

New tranche

In March 2024, Egypt increased its Extended Fund Facility (EFF) loan from $3 billion to $8 billion to help address inflation and reduce the budget deficit.

According to a statement from Finance Minister Ahmed Kouchouk on January 5, the North African country is set to receive a $1.2 billion tranche of the EFF loan in January.

Cooling inflation

Egypt has managed to reduce inflation to 23.4% in December, down from 25% in November, according to the Central Agency for Public Mobilization and Statistics (CAPMAS). The IMF had set a target of 16% inflation by the end of FY 2024/2025.