IMF says Egypt economic outlook ‘favourable’

By AFP - Jan 23,2018 - Last updated at Jan 23,2018

A man rides a bicycle as he carries breads on his head along a busy street near a poster of Egypt's President Abdel Fattah Al Sisi from the campaign titled Alashan Tabneeha in Arabic , which means (So You Can Build It), for the upcoming presidential election in Cairo, Egypt, on Monday (Reuters photo)

CAIRO — The International Monetary Fund (IMF) declared Egypt's economic outlook "favourable" on Tuesday after completing its second review of the country's reform programme.

The IMF had approved in November 2016 a $12-billion loan to Egypt, which has been shaken by political and economic turmoil since longtime president Hosni Mubarak was toppled in the 2011 revolt.

In order to obtain the IMF's approval for the three-year loan, Cairo has implemented a set of drastic reforms including the adoption of a value-added tax, energy subsidy cuts and floating the pound.

"The reforms that have been undertaken so far have been well-implemented and we are beginning to see the pay-off from these reforms," said Subir Lall, head of the IMF's mission for Egypt.

"We think that the reform programme and the reform momentum should remain in place," Lall told reporters in an online briefing.

The IMF disperses tranches of the loan to Egypt based on periodic reviews of the programme.

In December, it approved a third tranche worth $2 billion, bringing the total released to date to just over $6 billion.

In the report released on Tuesday, the IMF said Egypt's economy grew 4.2 per cent in the year to June 2017, up from 3.5 per cent the previous year.

Gross domestic product was expected to expand by 4.8 per cent in the current financial year and by 6 per cent in the medium term, it said.

Egypt's inflation rate has started to moderate thanks to tighter monetary policy since peaking in July at 35 per cent, after authorities implemented reforms sought by the IMF.

It is expected to fall to around 12 per cent by June, and to single digits 2019, the IMF said.

The pound's devaluation saw the Egyptian currency lose about half its value, a factor that also caused inflationary pressure.

The IMF report said "strengthening social protection will also be important to shield the most vulnerable."

"The social aspect of these reforms has made strong efforts to shield the most vulnerable from the cost of up-front macroeconomic stabilisation and those were unavoidable costs," said Lall.

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