IMF Executive Board Concludes 2017 Article IV Consultation and Completes Second Review under the Extended Fund Facility with the Arab Republic of Egypt
IMF News, December 20, 2017
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- Published: December 20, 2017
Program status and financing
- The Executive Board completed the second review of Egypt’s economic reform program under an Extended Fund Facility (EFF) and approved a disbursement equivalent to SDR 1,432.76 million (about US$2.03 billion), bringing total disbursements to SDR 4,298.29 million about US$6.08 billion.
- The three-year EFF arrangement equals 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.
- In completing the review, the Executive Board approved the authorities’ request for modifications of:
- the end-December 2017 and end-June 2018 performance criterion for net domestic assets, and
- the end-June 2018 performance criterion for the primary fiscal balance.
Macroeconomic assessment and outlook (summary of IMF statement)
- The reform program is yielding encouraging results: GDP growth is recovering, inflation is moderating, fiscal consolidation remains on track, and international reserves are at their highest level since 2011.
- The banking system has remained resilient to moderate shocks.
- The authorities are committed to a floating exchange rate regime, which serves as a buffer against external shocks; the CBE’s fee upon entry for the repatriation mechanism could help enhance pound flexibility.
- Monetary policy:
- The Central Bank of Egypt (CBE) tightened policy early in the year to reverse high inflation.
- Continued disinflation could allow gradual easing of interest rates, but the CBE should remain vigilant and be prepared to tighten if demand pressures reemerge.
- In the medium term, the CBE plans to move to an inflation-targeting framework to achieve low and stable inflation.
- Fiscal policy and public debt:
- Fiscal consolidation aims to place government debt on a declining trajectory.
- The primary surplus targets for 2017/18 and 2018/19 are judged achievable but subject to risks, including from higher oil prices.
- Continued reform of energy subsidies is critical for achieving fiscal objectives.
- Over the medium term, tax policy reforms and modernization of tax and customs administration are needed to create fiscal space for investment in human capital and infrastructure.
- Moving further away from product subsidies to better-targeted cash transfers would strengthen the social safety net.
- Structural reform priorities to raise growth potential and job creation:
- Improve allocation of resources and the business climate for private sector development.
- Reform the regulatory framework and strengthen competition.
- Improve access to finance and land.
- Strengthen governance, transparency, and accountability of state-owned enterprises.
- Fight corruption.
- Better integrate women and young people in the labor market.
Key statistics from Table 1 (selected series, values preserved as presented)
- Real GDP (market prices): 4.4, 4.3, 3.5, 4.2, 4.5, 4.8, 5.3, 5.5
- Consumer prices (end of period): 11.4, 14, 32.8, 29.8, 10.3, 11.9, 15.7, 15.2
- Consumer prices (period average): 11, 10.2, 23.9, 23.5, 22.1, 21, 13.7
- Gross Debt: 88.5, 96.9, 98.4, 103.3, 87.7, 91.3, 86.4, 86.7
- External: 7.8, 20.8, 18.1, 19.1, 16.7, 19.2, 17.7, 19.2
- Domestic: 80.5, 89, 77.7, 85.2, 68.6, 74.6, 67.2, 69
- Budget sector:
- Revenue and grants: 19, 18.2, 18.8, 18.6, 18.7
- Expenditure (incl. net acquisition of financial assets): 30.5, 30.2, 28.7, 29.7, 27.3, 28, 25.3, 26.1
- Of which: Energy subsidies: 4, 3, 3.9, 4.1, 3.1, 1.4, 1.2
- Overall balance: -11.4, -12.5, -10.5, -10.9, -8.5, -9.2, -6.7, -7.4
- Overall balance, excl. grants: -12.7, -8.6, -7.5
- Primary balance: -3.5, -1.8, 0.4, 0.2, 2.1
- Monetary sector:
- Credit to the private sector: 14.2, 37.8, 38, 8.7, 10.5, 13, 16.1
- Reserve money 6/: 33.3, 29.3, 26.8, -7.8, 24.5, 39.4, 12.7, 14.7
- Broad money (M2): 16.4, 35.2, 39.3, 22.2, 20.4, 23, 19.7
- Treasury bill rate, 3 month (average, in percent): 11.8, 17.5, 21.3, 17.4, 9, 8.8
- External sector:
- Exports of goods (in US$, percentage change): -14.7, -15.9, 15.9, 9.9, 7
- Imports of goods (in US$, percentage change): 1.9, -6.4, -0.1, -0.5, 7.6
- Merchandise trade balance: -9.7, -14.6, -11.2, -13.7, -13.1, -8.7
- Current account: -3.7, -6, -5.8, -6.1, -4.6, -4.5, -3.8, -4
- Capital and financial account (incl. errors and omissions): 5.1, 4.7, 5.2, 3.2, 2.4, 1.6
- Foreign direct investment (net, in billions of US$): 6.2, 6.8, 7.7, 9.4, 8.4
- External debt 4/: 14.5, 16.8, 31.6, 30.8, 34.6, 26.2, 30.3
- Gross international reserves (in billions of US$): 19.5, 17.1, 31, 30.7, 34.5, 33
- In months of next year's imports of goods and services: 5.4, 5.7
- In percent of short-term external debt 5/: 281, 158, 117, 98, 125, 108.3, 76.9
- Financing gap (in billions of US$): …, 0, 1.7, 2.6
- Memorandum items:
- Nominal GDP (in billions of Egyptian pounds): 2,444, 2,708, 3,496, 3,478, 4,465, 4,418, 5,336.80, 5,292.20
- Nominal GDP (in billions of US$): 332, 256
- GDP per capita (in US$): 3,731, 3,685, 2,704
- Unemployment rate (period average, percent): 12.9, 12.6, 12.1, 11.2, 10.7
- Poverty rate (percent): 27.8
- Population (in millions): 90.2, 92.3, 94.8, 94.4, 97, 96.6, 99.2
Source: IMF Executive Board press release, December 20, 2017.