International Monetary Fund Issues Article 4 Consultation Review for Egypt

On Tuesday, 23 January, the International Monetary Fund (IMF) issued an Article 4 Consultation Review for Egypt.

In its assessment of Egypt, the IMF wrote that “Egypt’s economy is recovering, supported by prudent macroeconomic policies and initial bold reforms aimed at addressing the major challenges that have confronted the economy in recent years.” The IMF reported that Egypt’s GDP growth accelerated from 3.5% to 4.2% in the latest fiscal year and is projected to increase to 6% in the medium term.

The IMF also noted that Egypt’s primary fiscal deficit fell from 3.5% of GDP to 1.8% of GDP in the latest fiscal year and will reach a surplus in the current fiscal year. In part, this has been driven by energy subsidy reform, which drove the cost of fuel subsidies down from 5.9% of GDP in Fiscal Year 2013-14 to a projected 2.4% of GDP in the coming fiscal year.

Subir Lall, head of the IMF team for Egypt, stated, “This macroeconomic turnaround at home and the supportive global economic environment provide a unique opportunity to carry the reform momentum into areas that have historically been hard to tackle.”

For more information on Egypt’s economic reform program, please see the Embassy’s factsheet, and the full IMF release below.

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Egypt: Time to Entrench Growth and Make It More Inclusive
January 23, 2018
http://www.imf.org/en/News/Articles/2018/01/22/na012318-egypt-time-to-entrench-growth-and-make-it-more-inclusive

Egypt’s economy is recovering, supported by prudent macroeconomic policies and initial bold reforms aimed at addressing the major challenges that have confronted the economy in recent years. The task now is to deepen reforms to raise economic growth further, make it last, and spread its benefits to Egypt’s rapidly growing population and its youth and women, the IMF says in its latest economic health check.

After more than a year since the launch of the economic reform program, GDP growth is strengthening and inflation is declining. The government trimmed the budget deficit, tourism revenues and remittances are increasing, and the country’s foreign exchange reserves have been rebuilt. The floating of the pound and the initial steps to improve the business climate have helped boost growth.

“This macroeconomic turnaround at home and the supportive global economic environment provide a unique opportunity to carry the reform momentum into areas that have historically been hard to tackle. Deep and lasting structural reforms are needed to create jobs as speedily as needed for Egypt’s growing population,” said Subir Lall, head of the IMF team for Egypt.

CONTEXT

Egypt launched a reform program when its economy faced rising imbalances that led to weakening growth, high public debt, a widening current account deficit, and declining official reserves. To support the homegrown reforms, in November 2016 the government initiated an IMF-supported arrangement to restore the stability of the country’s finances and promote growth and employment, while shielding lower-income households from the adverse effects of the changes. On December 20, 2017, the IMF Executive Board approved the third installment of the three-year, $12 billion Extended Fund Facility.