The International Monetary Fund (IMF) delegation has reached an agreement on the second $2b tranche disbursement of the $12bn loan, bringing total disbursements under the programme to $6bn. The agreement came after their second review of Egypt’s economic reform programme during the delegation’s visit to Cairo.
The agreement is yet subject to approval by the IMF’s Executive Board, according to an IMF press statement on Friday.
“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 stabilisation and the return of confidence,” said Subir Lall, head of the IMF delegation.
Furthermore, Egypt’s GDP growth increased to account for 4.2% during fiscal year (FY) 2016/17, compared to the 3.5% forecast, the statement indicates. On the other hand, account deficit declined in dollar terms, supported by the increase in non-oil exports and tourism receipts.
Meanwhile, portfolio investments in Egypt reached $16bn, and foreign direct investment (FDI) increased by 13%. Yet, headline inflation has peaked in July and has been on a declining path since then, supported by the Central Bank of Egypt’s (CBE) monetary policy stance.
Egypt adopted its economic reform programme in 2016, which included currency flotation, resulting in the pound losing about 50% of its value, implementing the VAT, and reducing energy subsidies, which caused inflation to reach a historical sky-rocket high level of over 33% in July.
According to the statement, budget performance was in line with projections with a primary deficit of 1.8% of GDP, while the overall deficit exceeded projections by 0.4% of GDP to register at 10.9% of GDP.
“The CBE remains committed to achieving 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,” said Lall.
Moreover, the statement praised the government’s comprehensive and ambitious agenda of structural reforms aiming to create jobs to meet the rapidly growing population, through increasing private sector-led investment, productivity growth, and enhanced competition.
