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IMF deal 'not end all solution', but important step to economic recovery: Egypt finance minister

Passant Darwish , Monday 19 Sep 2016
Amr El-Garhy
File Photo: Finance Minister Amr El-Garhy at a news conference in Cairo, Egypt August 11, 2016 (Photo: Reuters)
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Egypt's finance minister Amr El-Garhy said on Monday that the financial deal recently signed with the International Monetary Fund "won't solve] everything, but it is an important step on the way" to economic recovery.

During Monday's Cairo-based Euromoney conference, El-Garhy said that the government's priority is restoring the ailing tourism sector, which is directly related to national income, the flow of foreign currency and economic activity in general.

Egypt reached a preliminary agreement with the IMF loan programme in August to secure a three-year $12 billion loan facility, which is awaiting the approval of the fund's executive board.

The minister told the Egyptian newspaper Al-Mal on Sunday that the IMF executive board's approval is expected by the end of September or by 9 October after its annual meeting, highlighting that Egypt has already secured the financing required for its reform programme to receive the first tranche of the international lender's loan, which is worth $2.5 billion.

IMF Egypt mission chief Chris Jarvis previously said that Egypt should secure around $5 billion to $6 billion from bilateral creditors before the programme is brought to the board so that the IMF can be sure that the programme is fully financed.

"We want to rely on ourselves," El-Garhy said, adding that Arab Gulf countries "have been standing by us in the best way possible... [but now] we have to take the actions needed to get the economy back on track."

Egypt, which relies heavily on imports, mostly food, embarked on a fiscal reform programme in July 2014 to curb the growing state budget deficit –estimated at 11.5 percent of GDP in 2015/16 – that has included cutting subsidies and the introduction of the value-added tax, which was ratified by the president and implemented earlier this month.

"We want to decrease the budget deficit to 10.5 percent," El-Garhy said.

Egypt, the most populous Arab country, has been suffering from an acute foreign currency shortage since the 2011 revolution due to a drop in foreign tourists and investors.

The downing of the Russian flight over Sinai last year – which led Russia and several other countries to suspend passenger flights to Egypt – was another blow to Egypt's already ailing tourism industry.

The number of tourists visiting Egypt  in the first half of 2016 dropped by 50 percent compared to the same period last year, according to Egypt's Tourism Authority.

The current economic situation is a result of "the the turbulence and government turnover during the past four years, the economy before 2011 was good," El-Garhy added.

Prior to 2011, the budget deficit stood at less than 7 percent and economic growth neared 8 percent, he said.

In May, Egypt's government set its growth rate target for FY16/17 at 5.2 percent of GDP.

Growth slowed to 4.5 percent in the first half of the last fiscal year, compared to 5.5 percent a year earlier, the minister said while presenting the new budget to the parliament.

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