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Friday, 14 May 2021

'IMF’s SBA programme for Egypt achieved its goal, final review to be completed in May,' says IMF official

'We expect a gradual improvement in Egypt’s economic growth during FY2021/2022 at 2.5 percent, and at 5.7 percent in FY2022/2023,' says the IMF's director of the Middle East and Central Asia Department

Doaa A.Moneim , Sunday 11 Apr 2021
The International Monetary Fund (IMF) logo is seen at the IMF headquarters building. Reuters

The International Monetary Fund (IMF) has revised its projections of the real GDP growth in the Middle East and North Africa (MENA) region to pick up to 4 percent in 2021, an upgrade of 0.9 percent relative to the fund’s October projections.

This came within the IMF’s updated report on the regional economic outlook for the Middle East and Central Asia, released on Sunday, as part of the World Bank’s and the IMF’s spring meetings events that will conclude officially on Sunday.

However, growth recovery in oil importers is expected to be sluggish over the near term, with growth projected at 2.3 percent in 2021—a downgrade of 0.4 percent relative to October, including Egypt, which is forecast to experience a sluggish recovery in 2021.

In an interview, the IMF’s Director of the Middle East and Central Asia Department (MCD) Jihad Azour told Ahram Online that a year into the pandemic, the MENA’s countries have managed to come off gradually from the direct severe impacts of the pandemic on their economies through their adopted procedures that aimed to set the balance between the people’s health and the economy protection.

Accordingly, the region is expected to see an economic reflation in 2021, but it will be partial and divergent, as a result of the uneven inoculation with the vaccine against the virus, according to Azour.

He also added that the expected economic reflation in the region depends on the policies the region’s countries would adopt to protect the economic sectors and secure the minimum limit of economic stability in the post-pandemic phase.


Azour explained that the improvement in the IMF’s projections for the region was driven by the global oil prices that picked up over the past few months, which was reflected on the oil exporter countries in the region.

For Egypt, Azour told Ahram Online that Egypt has managed to counter the crisis in a relative cost compared to its peers in the region, keeping its positive economic growth at 3.6 percent during FY2019/2020, becoming the only country that witnessed a positive growth in the region over the year.

“We expect a gradual improvement in Egypt’s economic growth during FY2021/2022 at 2.5 percent, and at 5.7 percent in FY2022/2023,” said Azour.

“This improvement depends on the continuance of the financial support policies the government has already adopted since the onset of the pandemic and the achievement of the public finance stability. In this regard, we expect Egypt’s initial budget surplus to restore its pre-pandemic levels in 2021 or even will be slightly better than these levels. This will be used in expanding social protection programmes and meeting the countries finance needs.”

According to the report, Egypt’s prudent macroeconomic policies and high real yields supported the reversal of earlier outflows by the end of 2020 despite the 4 percent cut in interest rates during the year that the Central Bank of Egypt (CBE) introduced as a bid to contain the pandemic impacts on the economy.

Domestic banks played a key role in funding Egypt’s government in 2020, covering more than 50 percent of public gross financing needs, according to the report.

Commenting on that, Azour said Egypt’s financial policy resulted in maintaining high levels of the international reserves and attaining stable interest rate levels, as well as increasing finances for small and medium-sized enterprises (SMEs), and all of that contributed to navigating the crisis with the least losses.

Moreover, Egypt expanded the space of social protection to mitigate the burdens of the crisis shouldered by the people, especially vulnerable groups amid the crisis, according to Azour.

“Yet, accelerating the country’s economic reform process and unleashing the private sector to play its role in the economy through the structural reforms are the key engines for Egypt to restore its pre-pandemic growth levels that post up to 5.5 percent,” Azour expounded.


One of the key messages the report signaled is that the region, including Egypt, has to continue its fiscal policy that encompasses boosting its revenues through various avenues, including enhancing the tax system revenues.

Applying to Egypt, Azour clarified to Aharm Online that the IMF-$12 billion-backed reform programme that Egypt implemented in 2016 has resulted in improving the country’s public finance performance and increasing the treasury revenues through the tax reforms it adopts.

It also managed to attain an initial surplus and re-prioritize its spending, which are key objectives of the programme, according to Azour.

He noted that Egypt is going in such a path and is working on new procedures and policies for the sake of boosting tax revenues going forward, which is a key pillar in attaining its required economic growth through enhancing revenues.

“It is imperative for Egypt to set the balance between supporting the economic recovery and keeping the current stability levels, which is the path to maintain the low interest rate levels and benefit more from the international financial inflows,” said Azour.

As the IMF is set to conduct its second and final review of Egypt’s 12-month stand-by agreement (SBA) programme, through which the IMF approved a $5.2 billion loan for the country in June to finance Egypt’s second phase of economic reforms, Azour unveiled to Ahram Online that the final review is expected to be completed by May, with a projected third tranche worth $1.6 billion to be handed to Egypt.

During 2020, Egypt received two tranches under the SBA programme loan worth $3.6 billion.

“The SBA programme has achieved its goals in Egypt, contributing to the country’s return back to the global financial markets, keeping good economic growth levels, as well as the return of capital flows. It also completed the government’s economic reforms and helping the country to address one of the hardest crises that the Egyptian economy has experienced in decades,” Azour illustrated.

Going forward, Azour pointed out that it is necessary for Egypt to resume its reforms, decline costs rates, increase productivity, and leave room for the private sector to play its role in the country’s economic development.


On whether Egypt would need to engage with the IMF in future programmes, especially with the severe impacts of the ongoing crisis, Azour noted that the IMF is still a partner to Egypt, but it is premature to talk about future plans with the country.

For the MENA region, Azour said that the IMF estimates the financing needs for the region to hike by $320 billion during 2021 and 2022 to reach $1.1 trillion.

“This will be met both through the countries’ internal markets as well as the global financial markets and the international financial institutions,” Azour clarified.

He added that during the past few months, the international financial markets saw positive developments, which helped in increasing the liquidity and keeping interest rates at low levels, but the region’s countries have to realize that this performance could change going forward, with a chance to experience high interest rate levels and a decline in liquidity.

That said, the IMF counts on the ability of the region’s countries to decrease their budgets’ deficits incrementally and improve their public debt management in order to alleviate the impact of public debt burdens on their economies, finance the economy, and protect their economies against the likely changes in global financial markets, according to Azour. 


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