The International Monetary Fund (IMF) said in its staff report after the third review of the Egyptian economy that a further increase in global oil prices would put pressure on the Egyptian budget and require a larger adjustment of domestic fuel prices to achieve cost recovery and preserve the fiscal consolidation objectives under the economic programme.
The Egyptian economic programme gains added importance in uncertain global financial conditions, mentioned the report, adding that there has been a shift to capital outflows in recent months as tightening global financial conditions have contributed to a pullback by investors from emerging markets.
Egypt’s comfortable level of foreign reserves leaves it well positioned to manage any acceleration in outflows, said the report, adding that the global situation heightens the importance of Egypt’s maintaining the sound macroeconomic policy framework established under the economic programme and consistent policy implementation.
“These risks are mitigated by the authorities’ strong record of reform implementation and a sound macroeconomic policy framework,” said the report, noting that global risks highlight the need to broaden and accelerate structural reforms to sustain private sector-led growth that will absorb the rapidly growing labour force and ensure that the benefits are perceived more widely.
