CAIRO – 1 November 2018: The International Monetary Fund (IMF) and the Egyptian government reached October 31, an agreement to give Egypt the fifth $2-billion settlement. After receiving the $2 billion, Egypt will have now received $10 billion.
This is the fifth out of six instalments that are part of the $12-billion loan agreement that was approved by the IMF executive board in November 2016.
The agreement came after the IMF staff team reviewed Egypt’s economic reform program for the fourth time during their visit from October 18 to 31.
“The staff-level agreement is subject to approval by the IMF’s Executive Board,” IMF’s statement revealed.
The statement reviewed the results of the economic reforms in Egypt, concluding, “The Egyptian economy has continued to perform well, despite less favorable global conditions, supported by the authorities’ strong implementation of the reform program. GDP growth accelerated from 4.2 percent in 2016/17 to 5.3 percent in 2017/18 while unemployment declined to below 10 percent. Meanwhile, the current account deficit narrowed to 2.4 percent of GDP in 2017/18 from 5.6 percent the year before, primarily driven by strong remittances and a recovery in tourism. Gross general government debt declined from 103 percent of GDP in 2016/17 to about 93 percent of GDP in 2017/18, supported by fiscal consolidation and higher growth.”
Furthermore, the statement explained, “The Central Bank of Egypt’s (CBE) prudent monetary policy helped bring down annual inflation from 33% in July 2017 to 11.4% in May 2018. However, inflation increased again to about 16% in September 2018, reflecting the pass-through from energy price increases in June and a stronger than expected increase in volatile food prices in September.”
IMF added that CBE targets to reduce inflation to single digit in the medium term, “Egypt’s fiscal policy in 2018/19 and beyond will continue to aim at keeping general government debt on a clearly declining path and achieving a primary surplus of 2 percent of GDP. The government also remains committed to continuing energy subsidy reforms and raising revenues which will help create fiscal savings to invest in a well targeted social safety net, human development including health and education, and infrastructure.”
It also referred to the external financial conditions for emerging markets which make CBE committed to a flexible exchange rate policy that will help enhance competitiveness, protect Egypt’s foreign reserves, and cushion against external shocks. Egypt’s banking system remains liquid, profitable, and well capitalized.
The state explained that Egypt needs to continue its energy reforms and raise revenues to create fiscal savings to invest in a well-targeted social safety net and human development strategies.
“To improve fiscal transparency and public access to information, the authorities have continued to expand the data disseminated on the budget process and execution throughout the year,” it added.
IMF welcomed the authorities’ comprehensive efforts to improve the living standards of the most vulnerable.
It noted that that efforts like Takafol and Karama, which has expanded to cover around 10 million individuals, and such programs are vital for micro-financing, and youth and women empowerment.
“We welcome the authorities’ comprehensive efforts to improve the living standards of the most vulnerable. These efforts include: Takafol and Karama, which has expanded to cover around 10 million individuals; Forsa, which has created job opportunities for graduates of the Takafol program; and, Mastoura, which provides microfinancing to women for sustainable income generation. These programs are being complemented with the Sakan Karim program to provide clean drinking water and sanitation to rural areas. Moreover, a social package consisting of an additional increase in the salaries of public servants, an increase in pensions, and a progressive increase in tax credits has been implemented.”
“The government continues to make efforts to implement reforms that aim to help the private sector invest and create the jobs needed to achieve more inclusive and sustainable growth for Egypt’s young and growing population. These reforms include: improving access to industrial land; promoting competition; improving transparency and accountability of state owned enterprises; and fighting corruption,” the statement read.
Finally, the team thanked Egyptian authorities and the technical team in the CBE and finance ministry, as well as others, for their hospitality.