## Egypt: A Path Forward for Economic Prosperity

_IMF News, July 24, 2019_

## Source details

**Canonical URL:** [Egypt: A Path Forward for Economic Prosperity](https://www.imf.org/en/news/articles/2019/07/24/na072419-egypt-a-path-forward-for-economic-prosperity)

## Other formats

- [Markdown version](/en/news/articles/2019/07/24/na072419-egypt-a-path-forward-for-economic-prosperity/index.md)
- [Structured JSON version](/en/news/articles/2019/07/24/na072419-egypt-a-path-forward-for-economic-prosperity/index.json)
- [Bundle manifest](/en/news/articles/2019/07/24/na072419-egypt-a-path-forward-for-economic-prosperity/bundle-manifest.json)

## Bibliographic details
- Published: July 24, 2019

---

### Program objectives and context
- Addressed significant macroeconomic imbalances that had built up by 2016 due to:
  - Large budget deficits, loose monetary policy, and a fixed exchange rate.
  - Drastic reduction in foreign exchange reserves, high inflation, and unsustainably high public debt.
  - Falling growth and rising unemployment, especially among women and youth.
- Immediate priorities:
  - Restore macroeconomic stability and avoid a crisis.
  - Move to a flexible exchange rate to restore equilibrium in the foreign exchange market and eliminate the shortage of foreign exchange.
  - Rein in the budget deficit via a three-year plan; deficit was "at over 10 percent of GDP".
  - Tighten monetary policy by raising interest rates to reduce public debt as a share of GDP and limit inflation.
  - Address extensive fuel subsidies that made fuel in Egypt "one of the cheapest in the world" and disproportionately benefited the well-off.

### Program design and social protection
- Supported by a US$ 12 billion EFF arrangement from the IMF.
- Fiscal space from subsidy reform was reallocated to:
  - Better-targeted social spending.
  - Investment in health, education, and public infrastructure.
- Social spending measures:
  - Expanded modern cash transfer programs to those most in need.
  - Takaful and Karama (Solidarity and Dignity) expanded from about 200,000 households to 2.3 million households, covering 10 million people.
  - These programs were designed to ensure the poor did not bear the costs of economic adjustments and to sustain public support for broader reforms.

### Main achievements and macroeconomic outcomes
- Achieved the program’s key objective: macroeconomic stability to attract investment, raise growth, and create jobs.
- Reported outcomes:
  - Current account deficits have fallen.
  - Foreign exchange reserves are at all-time high levels.
  - Growth recovered from "around 4 percent" to "5.5 percent now", and "is expected to reach 6 percent by next year".
  - Unemployment has fallen "below 9 percent" to its lowest level in over a decade.
  - Public debt has begun to decline.
  - Inflation has fallen steadily—"on track to reach single-digits by next year".
- Structural and competitiveness improvements:
  - Fuel subsidy reform improves price signals and resource allocation, encouraging private investment into more labor-intensive sectors.
  - Reforms in competitiveness, public procurement, and transparency of state-owned enterprises aimed to improve government effectiveness and modernize the economy for greater participation in global trade.

### Policy priorities going forward
- Two overarching priorities:
  - Cement the gains in stabilizing the economy.
  - Accelerate reforms to make the private sector the engine of growth.
- Specific policy directions:
  - Preserve the cushion of foreign exchange reserves by maintaining a flexible exchange rate.
  - Keep inflation on the decline and continue reducing public debt to create more room for investment in health, education, and public infrastructure.
  - Transition the economy toward being increasingly market-oriented, with the state acting as a facilitator rather than the driver of growth.
  - Promote private sector-led job creation: Egypt needs "at least 700,000 new jobs annually" to absorb its young and growing population; these jobs "can only come from the private sector."

*IMF News — July 24, 2019*

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [EFF arrangement](https://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/20/56/Extended-Fund-Facility)
- [Fifth Review Press Release](https://www.imf.org/en/News/Articles/2019/07/24/pr19300-egypt-imf-executive-board-completes-fifth-review-under-arrangement-under-eff?sc_mode=1)
- [Egypt and the IMF](https://prd-sitecorecm.imf.org/en/Countries/EGY/Egypt-qandas)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2019/07/24/na072419-egypt-a-path-forward-for-economic-prosperity_