File Photo: IMF Deputy Managing Director David Lipton speaks during a panel discussion at the World Bank / IMF Spring Meetings April 23 in Washington, DC (Photo: AFP)
In the third review of the country’s economic reform programme, which was published on Monday, the executive board of the International Monetary Fund (IMF) praised the government's reform steps, asserting that the economic situation in Egypt “has continued to improve during 2018."
The fourth tranche of the $12 billion loan package, which was signed by Egypt and the IMF in 2016, is scheduled to be dispensed to Egypt by the end of July.
The tranche, worth $2.02 billion, would bring the total received by Egypt in the three-year loan deal to approx. $8.06 billion.
"The economic situation has continued to improve during 2018…positive performance has been instrumental in achieving macroeconomic stabilisation, with external and fiscal deficits narrowing, inflation and unemployment are declining, and growth accelerating," said David Lipton, the IMF’s first deputy managing director and acting chair.
The review also advises that a more inclusive private sector‑led growth model is essential to absorb the significant increase in the labour force expected over the next five years.
"The expanded structural reform agenda under the authorities’ reform program aims to address key impediments to private sector development, including steps to enhance transparency in industrial land allocation, strengthen competition and public procurement, improve transparency and accountability of state‑owned enterprises, and tackle corruption," the statement read.
Lipton also added that the "near‑term growth outlook is favourable, supported by a recovery in tourism and rising natural gas production, while the current account deficit is expected to remain below 3 percent of GDP and the public debt ratio to decline markedly by 2023."
The review highlighted that monetary tightening in 2017 helped anchor inflation expectations after the devaluation and fuel price hikes in 2016.
The report asserted that the Central Bank of Egypt should "maintain its restrictive stance to contain second round effects of fuel and electricity price increases, with future policy changes guided by inflation expectations and demand pressures."
The IMF review report said the recent further cuts to fuel subsidies, which took place last month, will safeguard the budget from unexpected changes in the exchange rate and global oil prices.
"The healthy level of foreign reserves and flexible exchange rate leaves Egypt well positioned to manage any acceleration in outflows, but this reinforces the importance of a sound macroeconomic framework and consistent policy implementation."