INTERVIEW: IMF review of Egypt’s reform programme will be based on progress made by the government: Deputy managing director

Nevine Kamel, Sunday 11 Jun 2023

During her first visit to Egypt, Antoinette Monsio Sayeh, deputy managing director of the International Monetary Fund (IMF), spoke to Al-Ahram regarding the latest developments in the country’s reform programme and the delays behind the fund’s scheduled review.

Antoinette Monsio Sayeh, deputy managing director of the International Monetary Fund (IMF). Ahmed Re
Antoinette Monsio Sayeh, deputy managing director of the International Monetary Fund (IMF). Photo: Ahmed Refaat


Sayeh also addressed the fiscal and monetary crises in the region and ways that countries, including Egypt, can tackle them.

Al-Ahram: What is the main objective of your current visit to Egypt. Whom did you meet from the government?

Antoinette Monsio Sayeh: In the beginning, I would like to express my happiness about being in Egypt for the first time and the warm reception of the Egyptian government. I have seen with my own eyes Egypt’s potential, depth of culture and history, and it is truly impressive.

The main objective of the visit is to discuss a paper that the IMF has just finished titled "Managing Fiscal Risks in the Middle East and North Africa," which focuses on fiscal risks for the region, not just Egypt.

Additionally, as the IMF, we took the opportunity to meet with Egyptian authorities to discuss ways to strengthen further our already good partnership and to best support Egypt in its reform efforts. I was privileged and grateful to have had discussions with the prime minister, the minister of finance, and the central bank governor.


"The government is called to reduce the pace of large national projects that put pressure on the exchange rate and move to a flexible exchange rate regime."

AA: The review planned for March did not take place, and the tranche scheduled for Egypt was not disbursed. After your discussion with the authorities, is the review expected to take place by the end of June?

AMS: Yes, the review did not take place, and the scheduled tranche was not disbursed. However, we are encouraged by the discussions we’ve had with the authorities during this visit and expecting to see the results of the authorities’ efforts falling into place as part of a comprehensive package in the next few weeks.

The Egyptian government should move forward with the economic reform programme, which has been initiated in a positive manner so far. The review of the programme will be determined based on the progress made by the government. The steps and progress made will allow us to gain confidence that we are on the right path and then move to the next phase.

The Fund has been a long-standing partner to Egypt, and if the programme is fully implemented, Egypt will be in a better position.

We discussed issues related to the role of the state in economic activity, achieving competitive neutrality between the private sector and the state, and the sale of a number of assets. The government is called to reduce the pace of large national projects that put pressure on the exchange rate and move to a flexible exchange rate regime.

AA: Will the distribution of the tranches be delayed due to the delay of the first review?

AMS: Our focus is on supporting the necessary reforms in Egypt. The priority is to implement the required reform actions to achieve concrete results. This is what will determine the date of the review. The important thing is to carry out the necessary reforms. That, in itself, will ultimately set the date for the review.

AA: The programme is expected to catalyze additional financing of about $14 billion from Egypt’s regional partners. What is their status?

AMS: We are only in the sixth month of a four-year programme. There is still plenty of time to stimulate these investment inflows. But without any doubt, the full implementation of the programme will help catalyze these investments to Egypt.


"Our advice to the CBE is to stand ready to resolutely address upward pressure on inflation. [...] should continue to pay attention to data, on which it should base monetary policy decisions."

AA: How do you assess the government's progress in reducing the state’s footprint in the economy?

AMS: The government is taking significant steps towards redefining the role of the state in the economy and achieving a level playing field between the public and private sectors. The first step was through the State Ownership Policy document, and the next step is to implement the terms of the document rapidly so we can get positive results.

AA: Planning Minister Hala El-Said has announced that the state will reduce its megaprojects that demand foreign currency, in line with the IMF's suggestions. How do you view this decision?

AMS: This is a significant decision, particularly since these projects consume a large portion of the country's foreign reserves.

The IMF and the Egyptian authorities share the same objectives, aiming to ensure the programme's success in achieving its goals and providing Egypt with a sustainable path for the economy and inclusive growth in the future. The main elements of the programme include reducing the role of the state in the economy, creating a more level playing field for the private sector and enterprises and ensuring scaling back large national projects.

With the growing demand for foreign currency, particularly in domestic goods sectors and services, slowing down the implementation of these projects will help contain demand for foreign exchange and inflation. Moreover, it will aid the transition to a permanent flexible exchange rate regime. The IMF hopes to see concrete results and progress in the programme in the next few weeks.

AA: How can the region, as well as Egypt, sustain private sector growth despite high-interest rates that make borrowing more expensive?

AMS: Improving the enabling environment for private sector activity in a number of countries can help sustain private sector growth. For instance, Egypt can leverage the private sector role instead of depending on state-owned enterprises.

To create an enabling environment, there is a need to invest more in reducing red tape and ensuring that the private sector has equal access to foreign exchange. These measures are essential to level the playing field for the private sector.

High inflation is another impediment to private sector investments. Addressing inflation would create a better environment to attract more investments, in addition to its broader impact on the living standards of the population.

AA: Have governments in the region adopted these measures?

AMS: Some steps taken by governments to contain inflation have been through monetary policy. However, like elsewhere tight policies have contributed to the slowdown in growth in the region. To contain inflation, the Central Bank of Egypt (CBE) has raised the interest rate by 10 percent and made some efforts to improve the transmission channels of monetary policy.

AA: Should CBE continue to raise interest rates in light of the high inflation figures released today?

AMS: Yes, our advice to the CBE is to stand ready to resolutely address upward pressure on inflation. Although inflation figures may have risen this month, they decreased somewhat last month. The CBE should continue to pay attention to data, on which it should base monetary policy decisions.

AA: The growth rate of the MENA region is expected to slow to 3.2 percent this year, from 5.3 percent last year. Which countries or groups of countries will be more inclined to decline, and what kind of policies should be implemented by regions to confront this challenge?

AMS: According to our projections, the growth in the MENA region will decelerate this year, as is the case for the rest of the world. It is expected to slow down to 3.2 percent from 5.3 percent last year.

All countries in the region will be affected by the deceleration this year. The GCC countries will experience the largest deceleration, moving from 7.7 percent in 2022 to around 2.9 percent this year.

The reduction in oil production in line with the OPEC+ agreement is one of the factors behind this. However, the reduction in the region’s growth is mainly attributed to efforts to address high inflation, which is a priority.

Egypt had a very robust growth rate of around 6.7 percent in the aftermath of the pandemic. However, in 2023, Egypt is expected to witness a deceleration of around three points, reaching 3.7 percent. This reflects the impact of global pressures on Egypt in terms of elevated prices as well as domestic challenges.

Low income countries in the MENA are expected to grow only by 1.3 percent; this group includes Sudan and Yemen, which are experiencing conflict situations. This is unfortunate as these are the countries most in need of robust growth.


"The program with Egypt provides some comfort that the country is relatively well positioned to withstand the consequences of the situation in Sudan."

AA: How can oil-producing countries utilize their revenues to mitigate the economic downturn?

AMS: These countries need to prudently manage their oil revenues by avoiding excessive spending on current expenses. Instead, they should focus on addressing structural issues and diversification challenges.

Due to the decline in oil production resulting from the OPEC agreement, growth in countries like Saudi Arabia and the UAE will be affected.

To stimulate growth, these economies are emphasizing non-oil sectors, such as retail and services, which are showing robust advancement. By relying more on non-oil sectors, these countries can boost their overall growth levels.

AA: What measures can non-oil exporting countries take to navigate the situation?

AMS: In the current slow growth and elevated inflation context, managing price pressures is crucial. This requires implementing tighter fiscal and monetary policies to attain macroeconomic stability, which is vital, in turn, for sustained growth.

However, pursuing such policies may present short-term trade-offs and challenges, necessitating careful monitoring of their impact on growth. Each country must carefully balance its policy choices based on its specific context.

Countries should also continue efforts to mobilize revenues while rationalizing spending, while protecting the most vulnerable, notably through safety nets. Furthermore, fiscal consolidation efforts play an important role in enabling countries to address significant debt vulnerabilities.

AA: How do political developments in Sudan impact the country and its economic prospects within the region?

AMS: The ongoing conflict has significantly affected Sudan's economy and infrastructure, leading to inflationary pressures and physical destruction. Clearly, at the moment, the situation is concerning.

Moreover, the situation in Sudan has repercussions for neighboring countries as many refugees have fled to these nations. Some of these countries themselves face fragility and food insecurity. Their capacity to absorb refugees is limited.

However, the program with Egypt provides some comfort that the country is relatively well positioned to withstand the consequences of the situation in Sudan.

AA: How can disruptions in global supply chains caused by the war in Ukraine be managed?

AMS: The IMF focuses on helping member countries address issues crucial for the global economy. Addressing trade fragmentation and distortions arising from the war in Ukraine is encouraged to ensure continued benefits from global trade. This is an important role of the World Trade Organization (WTO).

Another area is the debt problem faced by many countries, especially low-income nations. The IMF has collaborated with member countries through the global sovereign debt roundtable to enhance the coordination of debt restructuring processes. Efforts are being made to ensure that countries reach solutions with creditors, not only with traditional private Paris Club creditors but also with broader G20 creditors.

Finally, there is a collective focus on climate change mitigation and adaptation to alleviate its impact on member countries' economies and the global economy as a whole.

AA: MENA countries have faced fiscal imbalances. How can governments ensure balanced fiscal policies and improve the tax-to-GDP ratio without burdening the poor?

AMS: Governments in the region must take action on both the revenue and spending fronts to achieve fiscal balance.

This can be accomplished by increasing revenue collection. Taxes should be collected from a broader base, not from a small subset, including by removing tax exemptions.

On the expenditure side, measures can be taken, such as containing current spending, and prioritizing expenditure with long-term positive impact on growth, such as healthcare and education, while avoiding unnecessary inflation of payrolls.

Investments should also be wisely chosen. These actions on the spending side can contribute to addressing fiscal imbalances.

AA: What sort of uncertainty and risks are impacting the outlook of the region?

AMS: There are quite a few, as it is a very uncertain environment globally. One important risk comes from the tighter global financial conditions, which have led to some episodes of stress, most recently in the banking sector in the US and Switzerland.

Further tightening of financial conditions would mean higher borrowing costs and debt servicing costs for the region.

Another risk that the war in Ukraine worsen, potentially impacting food and commodity prices and adversely affecting growth in a number of countries. These are some of the risks ahead.

Antoinette Monsio Sayeh, deputy managing director of the IMF, speaking to Nevine Kamel, the editor-in-chief of Al-Ahram Hebdo.  

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