Press Release No. 04/227

Press Release: Statement by IMF Managing Director Rodrigo de Rato at the Conclusion of a Visit to the Arab Republic of Egypt

October 26, 2004

Mr. Rodrigo de Rato, Managing Director of the International Monetary Fund (IMF), issued the following statement today in Cairo at the conclusion of a three-nation visit to the Middle East region:

"I have had the privilege during my brief visit to Egypt to have discussions with His Excellency President Hosni Mubarak, Prime Minister Ahmed Nazif, Minister of Finance Boutros-Ghali, Central Bank Governor Farouk El Okdah and other senior officials.

"I was very pleased to visit Egypt at this time to review current developments and to discuss the government's recent economic reform initiatives. I have been greatly encouraged by the authorities' renewed commitment to liberalizing the economy and to removing impediments to private sector growth. I fully support the reform efforts of the new cabinet to create an environment conducive to private sector investment, and I encourage the government to maintain the momentum of reform.

"In my discussions with officials, we agreed on the importance of strengthening economic growth and creating employment. With Egypt's rapidly growing labor force, faster job creation will be necessary to reduce unemployment, particularly in the difficult youth job market. We share the authorities' strong belief that employment opportunities should come primarily from the private sector. Their recent decisions to lower tariffs and cut taxes, and their renewed commitment to privatize public enterprises and joint venture banks, are supportive of these goals. Additional efforts to strengthen the climate for business will help the private sector to expand further.

"At the same time, we discussed some remaining macroeconomic imbalances that impair the performance and risk perception of Egypt. In this regard, we discussed the importance of maintaining a prudent fiscal policy and arresting the growth of public debt, including through efforts to improve budget practices and reduce off-budget outlays. The IMF is committed to working with the government to address this issue. By ensuring a sustainable fiscal position and lowering public absorption, fiscal policy will play a critical role in supporting strong growth and low inflation.

"In recent years, Egypt's competitiveness has strengthened significantly and recent developments in the balance of payments and the foreign exchange market are encouraging. These developments will help to support Egypt's balance of payments and growth in the period ahead. We discussed actions and measures that would contribute to make Egypt's transition to a unified market-determined exchange rate system sustainable and long-lasting.

"I am encouraged by the government's plan to restructure Egypt's financial sector. The initiative comes at an important juncture and I urge the authorities to adhere to the goals they have set for reform of the sector. Measures to promote public savings will be needed to help offset the fiscal costs associated with the planned bank restructuring.

"Sustained higher growth will also require close integration into the global trading and investment community. The recent reduction in tariffs and tariff bands is most welcome; continued opening under Egypt's multilateral and bilateral trade agreements will create the conditions for faster investment and growth.

"This has been my first visit to the Middle East region as Managing Director of the IMF. Since joining the Fund, I have visited Africa, Asia, Europe and Latin America specifically to listen to the IMF's shareholders and to gain a deeper understanding of the issues they see as being of critical importance regionally and globally. My visits to Saudi Arabia-where I had consultations with ministers of the Gulf Cooperation Council as well as the Kingdom-Lebanon and Egypt has been a fruitful opportunity for me to share experiences and to gain insights. I underscored the importance of growth and stability in the Middle East, and the IMF's readiness to work closely with all nations in the region to help foster strong and sustainable economic growth, both in the region and in the world.. In this context, I particularly welcomed the Egyptian authorities' support for the Middle East Technical Assistance Center that has opened in Beirut."