Deepening and broadening of Egypt’s effective reforms is critical to underpin the positive outlook for growth and unemployment of the country, David Lipton, the International Monetary Fund (IMF) Acting Managing Director and Chairperson of the executive board, said on Wednesday, commenting on the board approval of Egypt’s loan final tranche disbursement, which is worth of about $2bn.
The executive board’s decision brings total disbursements of Egypt’s loan to $12bn which is the full amount approved by the IMF in November 2016.
Egypt successfully completed the three-year arrangement under the Extended Fund Facility and achieved its main objectives, Lipton mentioned over a statement from the IMF.
Egypt’s macroeconomic situation has improved markedly since 2016, supported by the authorities’ strong ownership of their reform programme and decisive upfront policy actions, Lipton added.
Critical macroeconomic reforms have been successful in correcting large external and domestic imbalances, achieving macroeconomic stabilisation and a recovery in growth and employment, and putting public debt on a clearly declining trajectory, Lipton mentioned.
“Monetary policy remains anchored by the medium-term objective of bringing inflation to single digits. Core inflation appears to be well contained,” he added.
The Central Bank of Egypt (CBE) should remain cautious until disinflation is firmly entrenched, Lipton mentioned, asserting that exchange rate flexibility remains essential to improve resilience to shocks and preserve competitiveness.
“The 2018/19 primary surplus target of 2% of GDP was met, helping to anchor a further decline in the public-debt-to-GDP ratio. It will be important to maintain primary surpluses at this level over the medium term to keep public debt on a downward trajectory,” he said.
The elimination of most fuel subsidies, which are regressive, will encourage energy efficiency, help protect the budget from unexpected changes in oil prices, and free up fiscal space for social spending, he reassured.
Improved revenue mobilisation is also essential to create room for spending in health, education, and social protection, Lipton added.
“The outlook remains favourable and provides an opportunity to further advance structural reforms to support more inclusive private-sector led growth and job creation,” he mentioned.
The Egyptian authorities have launched important reforms of competition policy, public procurement, industrial land allocation, and state-owned enterprises, and sustained implementation will be essential to ensure that statutory changes achieve meaningful results in the business climate, he concluded.
