December 20, 2017
PRESS OFFICER: Randa Elnagar
Phone: +1 202 623-7100Email: MEDIA@IMF.org
The Executive Board of the International Monetary Fund (IMF) today completed the second review of Egypt’s economic reform program supported by an arrangement under the Extended Fund Facility (EFF). The completion of the review allows the authorities to draw the equivalent of 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 in the amount equivalent to SDR 8.597 billion (about US$12 billion at the time of approval, or 422 percent of quota) was approved by the Executive Board on November 11, 2016 (see Press Release No. 16/501) to support the authorities’ economic reform program.
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.
The Executive Board today also concluded the 2017 Article IV consultation with Egypt. The associated press release will be issued separately.
Following the Executive Board discussion, Mr. David Lipton, First Deputy Managing Director and Acting Chair, made the following statement:
“Egypt’s reform program is yielding encouraging results. The economy is showing welcome signs of stabilization, with GDP growth recovering, inflation moderating, fiscal consolidation remaining on track, and international reserves reaching their highest level since 2011. The banking system has also remained resilient to moderate shocks. The outlook is favorable, but will require sustained efforts to maintain prudent policies and advance structural reforms to support the authorities’ medium-term objective of inclusive growth and job creation.
“By tightening monetary policy early in the year, the Central Bank of Egypt (CBE) has managed to reverse high inflation, which was the main risk to macroeconomic stability. The continuation of this disinflationary trend could open the door to a gradual easing of interest rates, but the CBE should remain vigilant and be prepared to tighten the monetary stance if demand pressures reemerge. In the medium term, the CBE is planning to move to an inflation-targeting framework, which will help achieve low and stable inflation. The authorities are committed to a floating exchange rate regime, which serves as a buffer for external shocks, and the CBE’s decision to introduce a fee upon entry for the repatriation mechanism could help enhance flexibility of the pound.
“The authorities’ fiscal consolidation plans aim at placing government debt on a declining trajectory. The primary surplus targets for 2017/18 and 2018/19 are achievable, but are subject to risks, including from higher oil prices. Therefore, continued reform of energy subsidies is critical for achieving the program’s fiscal objectives. Over the medium term, the authorities need to implement tax policy reforms and modernize tax and customs administration to create fiscal space for much-needed investment in human capital and infrastructure. Making further progress on moving away from product subsidies to better‑targeted cash transfers would strengthen the social safety net.
“Macroeconomic stabilization provides a solid basis for broadening the scope of structural reforms to attract investment, raise the growth potential, and create employment. The reform efforts should aim to improve allocation of resources in the economy and enhance the business climate for private sector development. Egypt’s priorities in this regard are to reform the regulatory framework, strengthen competition, improve access to finance and land, strengthen the governance and transparency of state-owned enterprises, fight corruption, and better integrate women and young people in the labor market.”
| Table 1. Egypt: Selected Macroeconomic Indicators, 2014/15–2018/19 1/ | ||||||||
| 2014/15 | 2015/16 | 2016/17 | 2017/18 | 2018/19 | ||||
| First Review | Prel. | First Review | Revised | First Review | Revised | |||
| Proj. | Proj. | |||||||
| Output and prices | ||||||||
| 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 | 13.7 |
| Public finances 2/ | ||||||||
| Gross Debt | 88.5 | 96.9 | 98.4 | 103.3 | 87.7 | 91.3 | 86.4 | 86.7 |
| External | 7.8 | 7.8 | 20.8 | 18.1 | 19.1 | 16.7 | 19.2 | 17.7 |
| Domestic | 80.5 | 89 | 77.7 | 85.2 | 68.6 | 74.6 | 67.2 | 69 |
| Budget sector 3/ | ||||||||
| Revenue and grants | 19 | 18.1 | 18.2 | 19 | 18.8 | 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 | 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 | -12.5 | -12.7 | -10.5 | -11.4 | -8.6 | -9.2 | -6.7 | -7.5 |
| Primary balance | -3.5 | -3.5 | -1.8 | -1.8 | 0.4 | 0.2 | 2.1 | 2.1 |
| Monetary sector | ||||||||
| Credit to the private sector | 16.7 | 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 | 18.6 | 35.2 | 39.3 | 22.2 | 20.4 | 23 | 19.7 |
| Treasury bill rate, 3 month (average, in percent) | 11.4 | 11.8 | 18.1 | 17.5 | 21.3 | 17.4 | 9 | 8.8 |
| External sector | ||||||||
| Exports of goods (in US$, percentage change) | -14.7 | -15.9 | 19.2 | 15.9 | 9.9 | 7 | 4.1 | 12.7 |
| Imports of goods (in US$, percentage change) | 1.9 | -6.4 | -0.1 | -0.5 | 4.3 | -0.1 | 4.4 | 7.6 |
| Merchandise trade balance | -8.5 | -9.7 | -14.6 | -11.2 | -13.7 | -9.7 | -13.1 | -8.7 |
| Current account | -3.7 | -6 | -5.8 | -6.1 | -4.6 | -4.5 | -3.8 | -4 |
| Capital and financial account (incl. errors and omissions) | 5.5 | 5.1 | 4.7 | 5.2 | 4.5 | 3.2 | 2.4 | 1.6 |
| Foreign direct investment (net, in billions of US$) | 6.2 | 6.8 | 8.8 | 7.7 | 9.4 | 8.4 | 10.2 | 9.9 |
| External debt 4/ | 14.5 | 16.8 | 31.6 | 30.8 | 28.7 | 34.6 | 26.2 | 30.3 |
| Gross international reserves (in billions of US$) | 19.5 | 17.1 | 31 | 30.7 | 30.2 | 34.5 | 31 | 33 |
| In months of next year's imports of goods and services | 3.5 | 3.1 | 5.4 | 5.5 | 5.1 | 5.7 | 4.8 | 5.2 |
| In percent of short-term external debt 5/ | 281 | 158 | 117 | 98 | 125 | 89 | 108.3 | 76.9 |
| Financing gap (in billions of US$) | … | … | 0 | 0 | 1.9 | 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$) | 332 | 332 | … | 256 | … | … | … | … |
| GDP per capita (in US$) | 3,731 | 3,685 | … | 2,704 | … | … | … | … |
| Unemployment rate (period average, percent) | 12.9 | 12.7 | 12.6 | 12.1 | 11.8 | 11.2 | 10.7 | 9.9 |
| Poverty rate (percent) | 27.8 | … | … | … | … | … | … | … |
| Population (in millions) | 89 | 90.2 | 92.3 | 94.8 | 94.4 | 97 | 96.6 | 99.2 |
| Sources: Egyptian authorities; and IMF staff estimates and projections. 1/ Fiscal year ends June 30. 2/ General government includes the budget sector, the National Investment Bank (NIB), and social insurance funds. 3/ Budget sector comprises central government, local governments, and some public corporations. 4/ Includes multilateral and bilateral public sector borrowing, private borrowing and prospective financing. 5/ Debt at remaining maturity and stock of foreign holding of T-bills. 6/ Reserve money as of end 2014/15 was affected by cancellation of deposit renewals at CBE due to unexpected announcement of national holiday on June 30, 2015. |
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