External Borrowing, Conditionalities, and Fiscal Reform: Analysis of IMF-Supported Programs in Egypt and Jordan
Egypt and Jordan have both relied on IMF-supported programs to address fiscal pressures. These programs combine external financing with policy conditions. Governments accept the conditions in exchange for access to credit. In turn, the programs aim to restore macroeconomic stability and improve public finances.
Egypt entered multiple IMF arrangements in recent years. The country faced rising public debt, large fiscal deficits, and external imbalances. IMF programs required significant fiscal consolidation. Authorities reduced energy subsidies and introduced a value-added tax. They also moved toward greater exchange rate flexibility. As a result, the fiscal deficit narrowed over time. However, the reforms also increased living costs for many households.
Jordan has maintained a longer and more continuous engagement with the IMF. The kingdom faces structural challenges that include limited natural resources, high public debt, and persistent unemployment. IMF programs in Jordan emphasized expenditure control, tax base broadening, and energy sector reform. In addition, the authorities worked to strengthen public financial management systems. These measures helped stabilize the fiscal trajectory. Yet progress on growth and job creation remained uneven.
Conditionalities form the core of both programs. The IMF typically requires clear targets for the primary fiscal balance, public debt, and external reserves. Governments must also implement structural reforms. Subsidy reduction stands out as a common requirement. Both Egypt and Jordan cut fuel and electricity subsidies to lower the fiscal burden. Moreover, tax reforms aimed to raise revenue without excessive reliance on borrowing.
External borrowing plays a dual role. IMF financing provides immediate balance-of-payments support. At the same time, the Fund’s endorsement often unlocks additional loans from other international lenders. This catalytic effect proves important for both countries. However, repeated borrowing also raises concerns about debt sustainability. Rising interest payments can limit space for productive public spending.
Outcomes differ in important ways. Egypt achieved larger short-term adjustments in its fiscal accounts. Jordan demonstrated greater continuity in reform implementation over successive programs. In both cases, social protection measures accompanied subsidy cuts. Officials introduced cash transfer programs to shield vulnerable groups. Nevertheless, the political and social costs of reform remained significant.
Overall, IMF-supported programs have shaped fiscal policy in Egypt and Jordan. They delivered external financing and pushed governments toward difficult reforms. The success of these efforts depends on consistent implementation and complementary policies that support growth and social stability. Continuous monitoring remains essential to assess long-term results.