Egypt ambitious to unlock its growth potential' - IMF team

12 Novembre 2017

Cairo, Egypt, November 12 (Infosplusgabon) - Reducing unemployment among Egypt’s youth and integrating more women into the labour force are key to the country’s economic liftoff and are the strongest and most sustainable form of social protection, an International Monetary Fund (IMF) team has observed.

During a two-week visit to Cairo for discussions with Egyptian authorities on the 2017 Article IV Consultation, the team found that the government is spearheading a comprehensive and ambitious agenda of structural reforms to unlock Egypt's growth potential.

According to the IMF team leader, Mr. Subir Lall, the reform plan aims to create well-paying jobs to meet the rapidly growing population by paving the way for increased private sector-led investment, productivity growth, and enhanced competition.

“We strongly welcome the authorities’ commitment to continue their efforts to expand childcare services [and] to promote women participation in the labour market,” said Mr. Lall, also expressing support to the authorities’ efforts to strengthen social measures through expanded programmes which now reach 2 million families, and enhancing data collection to improve targeting and ensure that subsidies reach the most vulnerable.

During the consultation, the IMF staff team and the Egyptian authorities have reached a staff-level agreement on the second review of Egypt’s economic reform programme, which is supported by a three-year IMF Extended Fund Facility (EFF) of US$12 billion.

Subject to approval by the IMF’s Executive Board, completion of the review would make available about US$2 billion, bringing total disbursements to Egypt under the programme to about US$6 billion.

“The staff-level agreement on the second review reaffirms the authorities’ commitment to their reform programme supported by the IMF. Egypt’s economy continues to perform strongly, and reforms that have already been implemented are beginning to pay off in terms of macroeconomic stabilization and the return of confidence.

“While the reform process has required sacrifices in the short term, seizing the current moment of opportunity to transform Egypt into a dynamic, modern, and fast-growing economy will improve the living standards and increase prosperity for all Egyptians,” Mr. Lall said in a statement made available on Saturday.

Egypt’s growth picked up during fiscal year 2016/17, with GDP rising by 4.2 percent compared to the projected 3.5 percent. Meanwhile, the current account deficit narrowed in dollar terms, supported by the increase in non-oil exports and tourism receipts while non-oil imports declined.

Reflecting increased investor confidence, the IMF team observed, portfolio investments into Egypt reached US$16 billion this year and foreign direct investment rose by 13 percent.

Headline inflation peaked in July but has been declining since then, supported by the Central Bank of Egypt’s (CBE) prudent monetary policy stance.

According to Mr. Lall, the budget performance was broadly in line with programme projection with a primary deficit of 1.8 percent of GDP. However, the overall deficit exceeded projection by 0.4 percent of GDP and reached 10.9 percent of GDP, mainly on account of higher than expected interest payments.

“Reflecting the overall strong policy framework and credibility of the authorities’ programme, foreign exchange reserves increased significantly to record levels,” he noted.

In the same statement, Mr. Lall affirmed that the CBE remains committed to achieve its goal of reigning in inflation which is expected to decline to about 13 percent in the quarter ending December of 2018.

“Its monetary policy framework is underpinned by a flexible exchange rate regime which has eliminated chronic foreign exchange shortages and the parallel market.

“The government’s aim to achieve a primary surplus in the current fiscal year will help achieve Egypt’s programme objective of putting government debt on a firmly downward trajectory over the medium term.

“This will reduce interest expenditures and create budgetary space for public infrastructure and well-targeted social spending,” he said.

The IMF mission also strongly supported the authorities’ plans to strengthen public financial management and fiscal transparency, including through enhanced monitoring of state-owned enterprises and publication of financial statements

“Egypt’s banking sector continues to remain liquid, profitable, and well capitalized. The CBE continues to strengthen the regulatory and supervisory framework for the banking sector including through implementing Basel rules. We also support the authorities’ aim to promote financial inclusion,” the team stated.

FIN/INFOSPLUSGABON/DDR/ GABON 2017

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