File Photo: Managing Director of the International Monetary Fund (IMF) Christine Lagarde (Reuters)
Egypt’s economic reform programme received much praise during this year’s spring meetings of the International Monetary Fund (IMF) and World Bank Group held last week in Washington.
IMF Managing Director Christine Lagarde said that floating the currency, rebuilding the foreign reserves, and reducing the fiscal deficit were all actions the government had taken that showed it was heading in the right direction.
“We are clearly seeing a rebound in foreign direct investment and in investment in Egypt in general. [There] is a clear rebound of growth as well, and hopefully the Egyptian economy is back on a productive, positive path that will be beneficial for all,” Lagarde said in a press briefing on the sidelines of the meetings.
Egypt’s foreign reserves reached $42.611 billion at the end of March, a rise of nearly $87 million from $42.52 billion at the end of February, the Central Bank of Egypt (CBE) said earlier this month.
Jihad Azour, director of the Middle East and Central Asia Department at the IMF, said that Egypt’s economic reform programme had taken large strides and procedures put in place to ensure stability had been successful.
He said that after a year and a half of launching the programme, the Egyptian economy had made large improvements, with the financial situation improving and the reserves at the CBE rising. He added that inflation had seen a reduction and that sectors such as tourism and exports had flourished.
The IMF expects Egypt’s economic growth rate to hit 5.2 per cent in the current fiscal year, registering up to 5.8 per cent in the 2018/2019 fiscal year, Minister of Finance Amr Al-Garhi noted in a statement made in Washington.
He highlighted the decrease in the unemployment rate from 13.5 per cent in December 2017 to 11.3 per cent in March 2018, expecting the rate to drop to 9.7 per cent by the end of fiscal year 2018/2019.
Azour said that Egypt’s economic reform programme was still at the halfway point, adding that the first phase had been achieved.
“Now the second phase in which the government is focusing on structural reforms and whose main aim is to enhance economic activity and to improve growth in order to provide the work opportunities that Egyptian young people deserve can begin,” Azour said during a press briefing.
He added that about 700,000 young people enter the labour market in Egypt every year.
Concerning expected fuel subsidy cuts, Azour said the amount and timing of the cuts was something for the Egyptian government. But he said the objective was to slash fuel subsides by the end of 2019.
Cutting fuel subsides had contributed to redirecting resources to supporting social programmes, he said. He expected the negative impacts of the subsidy cuts to be limited compared to last year, as the economy had been buoyed by the reduction in inflation.
Egypt’s annual headline inflation has declined from a peak high of 33 per cent in July 2017 to 13.1 in March 2018.
Meanwhile, Azour said that the reform programme and the measures that had been taken in order to achieve stability had seen costs for the country’s middle classes, but that many positive effects had been achieved. “The middle class is better off when it has more job opportunities,” he said.
Al-Garhi said a delegation from the IMF would visit Egypt in May for a third review of the country’s economy, in preparation for Cairo to receive the fourth tranche of an IMF loan of $2 billion.
Azour said that Egypt would receive the tranche after the assessment, expecting it to come around the middle of the year. In December 2017, Cairo received the third tranche of the loan, worth $2 billion. The fourth disbursement will bring the total Egypt has received so far to $8 billion.
During the spring meetings, it was also announced that the IMF, the CBE, and the Egyptian government will co-host a high-level conference in Cairo in May on promoting economic growth and job creation in Egypt.
The aim of the event is to recognise the successes in macroeconomic stabilisation that Egypt has achieved thus far, helping to build consensus among stakeholders around the reforms that are needed to attain higher and more inclusive growth and create jobs to meet the needs of Egypt’s young and growing population.
The conference will aim to shed light on global best practices and successful experiences elsewhere that can help enhance Egypt’s structural reform agenda and address medium-term challenges.
*This story was first published in Al-Ahram Weekly