News

Despite Obstacles Egypt Economic Reforms On Track: IMF

mm
Despite Obstacles Egypt Economic Reforms On Track: IMF

AP Photo/Cliff Owen

Amid surging inflation and many Egyptians finding it difficult to make ends meet, the International Monetary Fund (IMF) said in a new report on Tuesday that Egypt “is off to a good start” in implementing its new economic reform program.

Despite having fallen short on cutting fuel subsidies and balancing its fiscal budget, the country is making progress at curbing public spending, boosting confidence among investors, and addressing the increased inflation rate generated by the new economic measures.

The promising performance demonstrated by the Arab world’s most populous nation allows the international lender to release a new $US 1.25 billion payout, bringing the total disbursement to $US 4 billion.

“Macroeconomic stability is still fragile and the reform agenda is difficult, but the authorities have demonstrated a strong resolve to contain the risks,” the IMF said in its first review since it agreed to lend Egypt $US 12 billion dollars as part of a program aimed at reforming the country’s struggling economy.

Following the decision by Egypt’s Central Bank to devaluate the country’s currency exchange rate against foreign currencies in November last year, annual inflation spiked, reaching 31 percent in April, the highest in 30 years.

Prior to the flotation measure, which was a key demand from the IMF, there had been a wide gap between US dollars in banks and in the parallel market. Following the flotation, the lender agreed to loan Egypt $US 12 billion in an attempt to restore the state’s economy.

According to the new report, the transition to a flexible exchange rate “went smoothly” and the “parallel market has virtually disappeared and central bank reserves have increased significantly.”

On its part, the economy’s fiscal deficit has been reduced through the implementation of a series of tough measures, including restrictions on employees’ wages, energy subsidy reform and a new value-added tax, the report said.

Although these measures allegedly would help “free up space for social spending to support the poor,” surging prices on consumer goods, such as sugar, wheat and oil, without similar increases in wages have left many Egyptians finding it hard to cover basic expenses.

The Egyptian economy has been in a state of crisis since the 2011 revolt that toppled former president Hosni Mubarak.

Since president Abdel Fattah al-Sisi gained power through a popularly-backed military take-over in 2013 there have been heavy crackdowns on dissent and civil society groups, leaving public disgruntlement over the economy largely unexpressed.

Economic performance remains at risk due to potential political instability and security threats, according to the report.

“Opposition by vested interests, corruption, and fear of escalating social tensions could derail structural reforms …Worsening of domestic security conditions could undermine market confidence and the business climate,” the IMF said.

The tourism sector, representing about 12 percent of the economy before 2011, has taken a heavy toll since the downing of a Russian passenger plane in October 2015 over the Sinai, killing 224 people onboard. Since then, the sector has been slow to recover, although progress is being made.

Egypt Approves Establishing Egyptian Space Agency
Saudi Arabia to Allow Women to Drive by 2018

Subscribe to our newsletter


News
mm
@SamirShalabi_

Samir Shalabi is an urban researcher based in Alexandria. He previously worked as senior writer for Egyptian Streets and editor at al-Masry al-Youm's English-language edition Egypt Independent.

More in News

Trump: Time for US to Recognise Golan Heights as Israeli territory

Egyptian StreetsMarch 21, 2019

Al Aswany Embroiled in Military Lawsuit for Criticism on State

Egyptian StreetsMarch 21, 2019

Egyptian Parliament Agrees to Law that Protects Your Personal Data

Nour EltiganiMarch 19, 2019

Egypt named Africa’s “Hottest Tech Scene” by Business Insider

Egyptian StreetsMarch 18, 2019

Three Killed after Shooting on Tram in the Netherlands

Egyptian StreetsMarch 18, 2019

Hepatitis C Campaign to Test Foreigners Living in Egypt

Egyptian StreetsMarch 18, 2019

US Report Criticizing Egypt’s Human Rights Record Rejected by Egypt

Egyptian StreetsMarch 17, 2019

Arab and African Youth Platform Hopes to “Bridge the Gap” Between the Youth and Policy Makers

Egyptian StreetsMarch 17, 2019
Egyptian Streets is an independent, young, and grass roots news media organization aimed at providing readers with an alternate depiction of events that occur on Egyptian and Middle Eastern streets, and to establish an engaging social platform for readers to discover and discuss the various issues that impact the region.

© 2017 Egyptian Streets. All Rights Reserved.