IMF reaches staff-level agreement on the 4th review for Egypt’s extended fund facility
The IMF staff team and the Egyptian authorities have a staff-level agreement on the fourth review of Egypt's economic reform program, which is supported by the IMF's SDR 8.597 billion (about $ 12 billion) Extended Fund Facility arrangement.
The staff-level agreement is subject to approval by the IMF's Executive Board. Completion of this review would make available SDR 1,432.76 million (about US $ 2 billion), bringing total disbursements under the program to about US $ 10 billion.
The Egyptian economy has continued to perform well, despite less favorable global conditions, supported by the authorities' strong implementation of the reform program. GDP growth accelerated from 4.2 percent in 2016/17 to 5.3 percent in 2017/18 while unemployment declined to below 10 percent.
Meanwhile, the current account deficit narrowed to 2.4 percent or GDP in 2017/18 from 5.6 percent the year before. Gross general government debt declined from 103 percent or GDP in 2016/17 to about 93 percent or GDP in 2017/18, supported by fiscal consolidation and higher growth.
The Central Bank of Egypt 's (CBE) prudent monetary policy helped to decrease from 33 per cent in July 2017 to 11.4 per cent in May 2018. However, inflation has risen to 16 per cent in September 2018, reflecting the pass - through of energy price. increases in June and a stronger than expected increase in volatile food prices in September. In the medium term, the CBE aims to reduce inflation to single digits.
Meanwhile, the CBE's commitment to a flexible exchange rate policy will help enhance competitiveness, protect Egypt's foreign reserves, and cushion against external shocks. Egypt's banking system remains liquid, profitable, and well capitalized.
Egypt's fiscal policy in 2018/19 and beyond will continue to achieve general government debt on a declining path and achieving a primary surplus of 2 percent or GDP. The government is also responsible for investing reforms and raising revenues which will help create fiscal savings to invest in a well-targeted social safety net, human development including health and education, and infrastructure.
To improve fiscal transparency and public access to information, the authorities have continued to expand the data disseminated on the budget process and execution throughout the year.
IMF welcomes the authorities' comprehensive efforts to improve the living standards of the most vulnerable. These efforts include: Takafol and Karama , which has expanded to cover around 10 million individuals; Forsa, which has created job opportunities for graduates of the Takafol program; and, Mastoura, which provides microfinancing to sustainable income generation.
These programs are complemented with the Sakan Karim program to provide clean drinking water and sanitation to rural areas. Moreover, a social package consisting of an additional increase in the salary of public servants, an increase in pensions, and a progressive increase in tax credits has been implemented.
The government continues to make efforts to implement reforms that aim to help the private sector invest and create the jobs needed to achieve more inclusive and sustainable growth for Egypt's young and growing population.
These reforms include: improving access to industrial land; promoting competition; improving transparency and accountability of state owned enterprises; and fighting corruption.
