Egypt's economic reforms support financial discipline, reduce budget deficit: Finance minister to IMF

Doaa A.Moneim , Monday 13 Feb 2023

Egypt is adopting an economic reform trajectory that contributes to supporting its financial discipline and decreasing debt to GDP ratio and budget deficit, Minister of Finance Mohamed Maait told the Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva on Monday.



The plan aims to boost Egypt's macroeconomic indicators and help it avoid the severe risks associated with global shocks, Maait added during the meeting that was held on the sidelines of the World Government Summit (WGS) 2023 in Dubai. 

The meeting was also attended by IMF Executive Director Mahmoud Mohieldin and IMF Director of the Middle East and Central Asia Department Jihad Azour.

Maait told Georgieva that Egypt is focusing on achieving sustainable private sector-led economic growth to generate more job opportunities and bolster economic activity.

He cited the recent government decision to offer investment opportunities for the private sector in 32 state-owned companies as an example of such approach.

Egypt is currently engaged in a $3 billion Extended Fund Facility programme that extends over 46 months.

Egypt has received one tranche and is expected to receive the second tranche in the deal by the end of March following the completion of the first review scheduled in mid-March.

Under the programme, Egypt has pledged to the IMF to unleash the potential of the private sector in playing a greater role in the national economy, decrease the government footprint in the investment scene as well as apply structural reforms that address the imbalances of the macroeconomic indices in order to bridge the $17 billion financing gap expected over the coming four years.

Maait told Georgieva that Egypt wants to create an attractive investment environment by extending promising opportunities and unprecedented incentives to investors.

Georgieva asserted the IMF support to Egypt amid the ongoing challenging time to continue its economic reforms that centre on balanced and sound policies on the fiscal and monetary levels.

She added that these policies are imperative to contain the repercussions of the ongoing global economic crisis and enhance Egypt's plans to counter the fiscal risks.

Economic forecast

Egypt’s growth rates under the IMF loan programme are expected to gradually rise to between 5.5 and six percent after short-term challenges, including overcoming the repercussions of the Ukraine war and the private sector receives more room in the market.

The current account deficit is also projected to improve by two percent of GDP over the medium term while reserves are rebuilt to an adequate range under the programme.

Egypt’s inflation is expected to decelerate to around seven percent by FY2024/25.

Meanwhile, tax-to-GDP ratio is expected to increase by around two percent over the medium term.

The government will apply new tax-related measures in FY2023/24, targeting an increase of 0.3 percent in the tax-to-GDP ratio.

The measures are expected to be announced by the end of February 2023.

On Sunday, Maait noted that Egypt has managed to attain initial surplus of between 1.3 percent and two percent of GDP over the past five fiscal years compared to an initial deficit of 8.4 percent recorded in FY2013/2014.

He added that Egypt's real GDP growth doubled to 6.6 percent in FY2021/2022, up from 3.3 percent a year earlier.

Foreign direct investment inflows rose by 71 percent in FY2021/2022, with the sectors of construction, telecom, and information technology receiving the largest share of these investments.

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