Egypt's financing gap will reach $20 bln in coming two years: IMF official

Nevine Kamel, Lima, Peru, Friday 9 Oct 2015

The Egyptian government has taken some steps towards fiscal reform but debt levels remain high

Masood Ahmed
On the left is IMF director for the Middle East,Masood Ahmed, in a presser during the IMF and WB annual meeting on 9 October 2015 in Lima, Peru. (Photo: Nevine Kamel)

The gap in Egypt's financing is estimated at $20 billion over the coming two years, Masood Ahmed, IMF director for Middle East and Middle Asia, told Ahram Online at a press conference on the sidelines of the IMF and World Bank annual meetings held in Lima, Peru this week.

Egypt has succeeded for the second consecutive year to achieve improvements in the economy due to the increasing confidence in the political and economic system, as well as the government measures to implement fiscal reform policies, Ahmed said.

Gulf aid to Egypt has also helped the Arab country to improve its economy, he said.

As a result, the IMF was able to maintain its forecasts for Egypt's growth at 4.2 percent “if not higher”, he added.

However, Egypt still faces two main challenges to continue its economic development path.

“Lowering unemployment rate is a serious challenge facing the government," said Ahmed, adding that Egypt has to generate jobs for existing unemployed young people, as well as create new positions for future university graduates.

Unemployment in Egypt stood at 12.7 percent in mid-2015, with youth unemployment at 26 percent.

Additionally, the government must take measures to improve its macroeconomic indicators in a flexible manner, to cut its growing deficit and ultimately improve its economic position externally.

"The Egyptian government has taken steps in that direction but debt levels remain high," he said. 

ِEgypt's debt reached 90 percent of GDP in the current fiscal year.

"The government must continue its policies to improve its financial and economic position," he added.

Egypt's government aims to cut the budget deficit to 8.9 percent in the current fiscal year ending 30 June 2016, compared to 11.5 percent in the same period the previous year.

Ahmed said that the Egyptian government had not requested a loan from the IMF, adding that the international organisation is willing to stand by Egypt in the way the country prefers.

The exact value of a loan by the IMF to Egypt in case it was requested is yet to be determined, "We need to get to know the priorities and needs of the government in order to specify a loan value for the country," said Ahmed 

Political conflicts and oil 

For the Middle East and North Africa region, Ahmed sees two main factors in play in the next period, political conflicts and falling oil prices.

Each of these factors pressures different countries in the region. Political conflicts take their toll on the economies of Libya, Iraq, and Syria, said Ahmed, with the latter's GDP contracting by half during its conflict, and Yemen's by a quarter.

In addition, Lebanon and Jordan are facing economic burdens due to the region's refugee crisis.

On the other hand, oil prices are expected to remain lower than before their recent plunge.

Accordingly, oil-exporting countries have been severely damaged, recording losses of $360 billion in 2015.

But oil-importing countries benefited from the plunge in oil prices ,with gains amounting to $12 billion in 2015, which balanced the growth rates in the region.

As such, oil-exporting countries grew at a slower pace in 2015 than previous years, recording 2.5 percent compared to 2.7 percent in the previous year, while oil-importing countries grew more than in previous years with an average of 2.6 percent in the current fiscal year, compared to 1.8 percent in the previous year.

"Generally, growth has not changes. What has changed is the distribution of growth in the region," said Ahmed.

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