Egypt: IMF Executive Board Completes First Review under the Extended Fund Facility (EFF)
IMF News, July 13, 2017
Source details
- Canonical URL
- Egypt: IMF Executive Board Completes First Review under the Extended Fund Facility (EFF)
Other formats
Bibliographic details
- Published: July 13, 2017
Review outcome and financing
- On July 13, 2017, the Executive Board completed the first review of Egypt’s economic reform program supported by an arrangement under the Extended Fund Facility (EFF).
- Completion of the review allows the authorities to draw the equivalent of SDR 895.48 million (about US$1.25 billion), bringing total disbursements to SDR 2,865.53 million about US$4 billion.
- The three-year EFF arrangement is in the amount equivalent to SDR 8.597 billion (about US$12 billion at the time of approval, or 422 percent of quota) and was approved on November 11, 2016.
Program objectives and rationale
- The EFF-supported program aims to:
- restore macroeconomic stability and promote inclusive growth;
- correct external imbalances and restore competitiveness;
- reduce the budget deficit and place public debt on a declining path;
- boost growth and create jobs while protecting vulnerable groups.
- The Executive Board approved the authorities’ request for waivers of the June performance criteria for the primary fiscal balance and the fuel subsidy bill. These were missed due to higher costs of imported food and fuel products caused by large depreciation of the pound.
- The waiver was approved in view of the important measures taken in June to contain fuel subsidies and the planned stronger fiscal adjustment in the next two years, which will keep the program objectives on track.
IMF assessment and policy priorities (statements by Mr. David Lipton)
- Program start and confidence:
- “Egypt’s reform program is off to a good start. The transition to a flexible exchange rate went smoothly. The parallel market has virtually disappeared and central bank reserves have increased significantly.”
- “Market confidence is returning and capital flows are increasing. These augur well for future growth.”
- Immediate macroeconomic priority:
- Reduce inflation, which poses a risk to macroeconomic stability and hurts the poor.
- Monetary policy actions and framework:
- Central Bank of Egypt (CBE) has raised policy interest rates and absorbed excess liquidity.
- CBE developed a monetary framework with a clearly defined policy anchor and is stepping up communication to manage inflation expectations.
- CBE committed to maintain the flexible exchange rate to cushion shocks, preserve competitiveness, and accumulate reserves.
- Fiscal policy actions:
- Continued fiscal consolidation to place public debt on a declining path.
- The 2017/18 budget targets a primary surplus for the first time in a decade.
- Main deficit-reducing measures: increase of the VAT rate, continued reforms of energy subsidies, and wage restraint.
- The budget includes a strong social component to ease the burden of adjustment on the poor and vulnerable.
- Structural reform priorities:
- Improve public finance management, promote competition, encourage female participation in the labor force, and strengthen the financial sector.
- Recent legislative progress: an industrial licensing law and a new investment law passed; a new insolvency law in Parliament.
Risks and program implementation
- Macroeconomic stability remains fragile and the reform agenda is difficult, but authorities have demonstrated strong resolve to contain risks.
- A flexible exchange rate regime, a strong monetary policy framework, and commitment to continued fiscal adjustment are highlighted as critical to rebuild policy buffers.
- Strong ownership of the program is expected to support implementation of the reform agenda and to increase productivity and employment.
Selected macroeconomic indicators (as presented in Table 1)
- Real GDP (market prices):
- 2014/15: 4.4
- 2015/16: 4.3
- 2016/17 Prel.: 4.0
- 2017/18 EFF Revised: 3.5; 4.8; 4.5
- Consumer prices (end of period):
- 2014/15: 11.4
- 2015/16: 14.0
- 2016/17 Prel.: 16.6
- 2017/18 EFF Revised: 32.8; 11.1; 10.3
- Consumer prices (period average):
- 2014/15: 11.0
- 2015/16: 10.2
- 2016/17 Prel.: 18.2
- 2017/18 EFF Revised: 23.9; 13.3; 22.1
- Gross Debt:
- 2014/15: 88.5
- 2015/16: 96.9
- 2016/17 Prel.: 93.8
- 2017/18 EFF Revised: 98.4; 89.1; 87.7
- External / Domestic composition of gross debt:
- External: 2014/15: 7.9; 2015/16: 7.7; 2016/17 Prel.: 10.1; 2017/18 EFF Revised: 20.8; 8.9; 19.1
- Domestic: 2014/15: 80.5; 2015/16: 89.0; 2016/17 Prel.: 83.7; 2017/18 EFF Revised: 77.7; 80.2; 68.6
- Budget sector (revenue, expenditure, subsidies, balances):
- Revenue and grants (percent of GDP): 2014/15: 19.0; 2015/16: 18.0; 2016/17 Prel.: 20.7; 2017/18 EFF Revised: 18.8
- Expenditure (incl. net acquisition of financial assets): 2014/15: 30.5; 2015/16: 30.3; 2016/17 Prel.: 28.7; 2017/18 EFF Revised: 27.2; 27.3
- Of which: Energy subsidies: 2014/15: 3.0; 2015/16: 2.6; 2016/17 Prel.: 3.9; 2017/18 EFF Revised: 1.4; 3.1
- Overall balance: 2014/15: -11.4; 2015/16: -12.3; 2016/17 Prel.: -9.8; 2017/18 EFF Revised: -10.5; -8.4; -8.5
- Overall balance, excl. grants: 2014/15: -12.5; 2015/16: -9.9; 2016/17 Prel.: -8.6
- Primary balance: 2014/15: -3.5; 2015/16: -3.4; 2016/17 Prel.: -0.8; 2017/18 EFF Revised: -1.8; 1.1; 0.4
- Monetary sector:
- Credit to the private sector: 2014/15: 16.7; 2015/16: 14.2; 2016/17 Prel.: 8.3; 2017/18 EFF Revised: 37.8; 15.9; 8.7
- Reserve money 6/: 2014/15: 33.3; 2015/16: -1.6; 2016/17 Prel.: 16.1; 2017/18 EFF Revised: 26.8; 18.9; 24.5
- Broad money (M2): 2014/15: 16.4; 2015/16: 18.6; 2016/17 Prel.: 35.2; 2017/18 EFF Revised: 20.6; 22.2
- Treasury bill rate, 3 month (average, in percent): 2014/15: 11.8; 2015/16: 19.7; 2016/17 Prel.: 18.1; 2017/18 EFF Revised: 14.9; 21.3
- External sector:
- Exports of goods (in US$, percentage change): 2014/15: -14.6; 2015/16: -16.1; 2016/17 Prel.: 12.8; 2017/18 EFF Revised: 19.2; 8.4; 9.9
- Imports of goods (in US$, percentage change): 2014/15: 2.3; 2015/16: -6.2; 2016/17 Prel.: 1.7; 2017/18 EFF Revised: -0.1; 7.4
- Merchandise trade balance (percent of GDP): 2014/15: -11.7; 2015/16: -11.6; 2016/17 Prel.: -12.6; 2017/18 EFF Revised: -13.7
- Current account (percent of GDP): 2014/15: -3.6; 2015/16: -6.0; 2016/17 Prel.: -5.2; 2017/18 EFF Revised: -5.8; -4.4; -4.6
- Capital and financial account (incl. errors and omissions): 2014/15: 5.4; 2015/16: 5.1; 2016/17 Prel.: 4.7; 2017/18 EFF Revised: 4.2
- Foreign direct investment (net, in billions of US$): 2014/15: 6.6; 2015/16: 6.8; 2016/17 Prel.: 9.4; 2017/18 EFF Revised: 8.8; 10.4
- External debt (percent of GDP) 4/: 2014/15: 14.5; 2015/16: 16.8; 2016/17 Prel.: 22.9; 2017/18 EFF Revised: 31.6; 26.9
- Gross international reserves (in billions of US$): 2014/15: 19.5; 2015/16: 17.1; 2016/17 Prel.: 22.0; 2017/18 EFF Revised: 31.0; 29.0; 30.2
- In months of next year's imports of goods and services: 2014/15: 3.7
- In percent of short-term external debt 5/: 2014/15: 280.6; 2015/16: 157.7; 2016/17 Prel.: 283.1; 2017/18 EFF Revised: 117.2; 390.0; 125.2
- Financing gap (in billions of US$): …; 0.0; 16.3; 1.9
- Memorandum items:
- Nominal GDP (in billions of Egyptian pounds): 2014/15: 2,443.9; 2015/16: 2,708.3; 2016/17 Prel.: 3,434.1; 2017/18 EFF Revised: 3,496.0; 4,084.7; 4,464.6
- Nominal GDP (in billions of US$): 2014/15: 332.5; 2015/16: 332.3
- GDP per capita (in US$): 2014/15: 3,736; 2015/16: 3,684
- Unemployment rate (period average, percent): 2014/15: 12.9; 2015/16: 12.7; 2016/17 Prel.: 12.3; 2017/18 EFF Revised: 12.6; 11.3
- Poverty rate (percent): (table entry present but no numeric values supplied in the source excerpt)
- Population (in millions): 2014/15: 90.2; 2015/16: 92.3; 2016/17 Prel.: 94.4
IMF Press Release No. 17/281, July 13, 2017.