Egypt's economic reforms are a must whoever is the new president: Lagarde

Ahram Online, Friday 2 May 2014

IMF addresses importance of economic reforms as interim government announces plans to reduce subsidies and implement Value Added Tax (VAT)

Christine Lagarde
IMF Managing Director Christine Lagarde (Photo: Reuters)

"Egypt must have economic reforms to achieve growth and investment, no matter who will be in charge," said the Christine Lagarde, managing director of the International Monetary Fund (IMF) on Thursday.

“What we are seeing is rather encouraging when it comes to energy subsidy reform for instance and we certainly hope that whoever the new president of the country is, and thereafter the new parliament, will continue these reforms,” Christine Lagarde said in her interview with CNN.

Lagarde said that Egypt’s relationship with the IMF is still intact as the global fund continues to provide technical assistance concerning Value Added Taxes (VAT) and energy subsidy reforms.

Last year, Egypt announced that it would implement the VAT in order to increase fiscal revenues.

According to the Egyptian Tax Authority, the VAT will be fixed at a flat rate between 10 to 12 percent and will be imposed on all goods and services with a few exceptions such as subsidised foodstuffs like oil and wheat.

Meanwhile, the Egyptian interim government is currently working to reduce the value of subsidies to LE166 billion ($23.6 billion) in a new bill to be finalised by the end current fiscal year 2013/14.

In April, the government raised natural gas prices for households from LE0.1 to LE0.4 per cubic metre.

In the same month, an official source told Al-Ahram's Arabic news site that interim Prime Minister Ibrahim Mahlab's cabinet was considering raising the costs of three widely-used forms of petrol – 92 octane, 80 octane and diesel, all of which would be LE1 ($0.14) higher per litre.

The IMF had been in talks with Egypt regarding a $4.8 billion bailout package as the country has been coping with violence and economic woes since the 2011 overthrow of president Hosni Mubarak. 

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