An International Monetary Fund (IMF) team led by Mr. Chis Jarvis visited
Cairo from April 30 to May 11, 2017, to discuss policy priorities of the
first review for Egypt’s economic reform program supported by a three-year
IMF Extended Fund Facility (EFF) (see Press Release
No. 16/501)
At the conclusion of the mission Mr. Jarvis issued the following statement:
“The IMF staff team and the Egyptian authorities have reached a staff-level
agreement on the first review of Egypt’s economic reform program supported
by the IMF’s $12 billion arrangement. The staff level agreement is subject
to approval by the IMF’s Executive Board. Completion of the review would
make available SDR 895.48 million (about US$1.25 billion), bringing total
disbursements under the program to about US$4 billion.
“This agreement is a vote of confidence by the IMF staff in the continued
implementation of the Egyptian authorities’ program. It is also testimony
to the great efforts the Government and the Central Bank of Egypt (CBE)
have been making to reform the economy. The authorities’ economic reform
process is off to a good start. The liberalization of the exchange rate, as
well as the introduction of a VAT and continuing with energy subsidy reform
to strengthen the fiscal position, have all had significant effects.
Foreign exchange shortages are resolved and interbank market activity is
recovering. Egypt has regained investors’ confidence, as shown in the great
appetite for Egypt’s Eurobond sale in January 2017 and private sector
remittances and portfolio investments have increased considerably. The
manufacturing sector-key for job creation--is witnessing a strong rebound
and exports have increased significantly. Meanwhile, Egypt’s GDP growth
reached 3.9% in the first quarter of 2017 and primary fiscal deficit has
fallen by about 2% of GDP.
“The authorities see reducing inflation as a key priority for safeguarding
the welfare of people across Egypt. We support the CBE’s objective. to
bring down the rate of inflation to single digits over the medium term
consistent with its price stability mandate. We are confident that the
central bank has the tools to achieve this. We also commend the CBE for
maintaining a floating exchange rate regime and sustaining adequate
official reserves.
“The Ministry of Finance has drafted a very strong budget. If enacted by
Parliament, it will place public debt on a clearly declining path to
sustainable levels. We welcome in particular the plans to raise the VAT
rate, and to continue the process of reforming energy subsidies over the
three years. of the program. We also welcome the very good progress made on
structural reforms, especially Parliament’s approval of the new industrial
licensing and investment laws. Both acts will help unlock Egypt's growth
potential, attract investors, increase exports and industrial production,
as well as create adequate and well-paid jobs to absorb the rapidly growing
labor force.
“We are very pleased with the strengthened social protection measures in
the program. We are also very pleased that the government’s program
includes steps to make it easier for women to work outside the home. The Takafol and Karama program has been expanded to include 1.6
million families which is nearly 8 million people. 92% of the program
benefits women. The school meals for children program has been expanded to
include all public schools and the government is spending more on a program
for nurseries. In addition, the government is collaborating with the
private sector to launch an innovative program to provide safe means of
transportation. These measures are an essential counterpart to the economic
reform effort, and they will protect the most vulnerable people in Egypt
while the reform effort is underway.
“Egypt’s strong banking system continues to be the anchor for Egypt’s
financial stability. It has weathered well the transition to a floating
exchange rate regime. The CBE continues to aim to preserve and further
strengthen the resilience of Egypt's financial sector while complementing
the strong framework of banking regulation and supervision with adequate
crisis preparedness and management tools.
“Public financial management and fiscal transparency will continue to be
strengthened through reinforcing the institutional framework for
coordinating among different policy-making bodies and continuing to update
the elected parliament of budget updates.
“This is the Government’s program, and the IMF supports it. The program
will lay the foundations for strong and sustainable growth that improves
the lives of all Egyptians. The IMF team would like to thank the Egyptian
authorities and the technical teams at the CBE and the Ministry of Finance
for their openness, constructive discussions and their hospitality.”
