The Washington, D.C.-based bank said Cairo agreed to increase tax-to-revenue ratios and accelerate the divestment of state-owned enterprises.

The International Monetary Fund (IMF) announced an agreement with Egypt to release approximately $1.2 billion in funds to support the country’s troubled finances.

The Washington, D.C.-based bank said on Tuesday it reached a “staff-level agreement” that is subject to executive board approval after outlining steps to improve macroeconomic stability in Cairo.

The bank said the Egyptian authorities agreed to increase taxes as a percentage of gross domestic product (GDP) by 2% over the next two years and accelerate the divestment of state-owned enterprises, among other measures.

Ivanna Vladkova Hollar, who chairs the IMF’s discussions with Egypt, said: “A comprehensive reform package is needed to ensure that Egypt rebuilds its fiscal buffers to reduce debt vulnerabilities and Create additional space to increase social spending, particularly on health, education and social security,” the authorities said.

Hollar said that both sides also agreed on the need to speed up reforms and improve the business environment.

“In this regard, more decisive efforts are needed to level the playing field, reduce the country’s footprint in the economy and boost private sector confidence to help Egypt attract foreign investment and realize its full economic potential,” she said.

Egypt reached a deal in March to receive an $8 billion loan in tranches from the International Monetary Fund, subject to economic reforms, on top of a $3 billion, 46-month agreement reached in December 2022.

As part of the terms of the loan, Cairo agreed to let its currency devalue significantly and allow the exchange rate to be determined by market forces.

Egypt has been grappling with double-digit inflation and foreign exchange shortages, and its economic challenges include plunging revenues from the Suez Canal, the war in Ukraine and the impact of the COVID-19 pandemic.