IMF says Egypt economy recovering on back of reforms

International Monetary Fund expects Egypt's economy to grow by 3.8% in the fiscal year ending 30 June

The International Monetary Fund said the Egyptian economy has begun to recover after four years of slow activity as the government's structural reforms improve the business climate.
Government policies, including subsidy cuts and regulatory and administrative reforms, are starting to produce a "turnaround in economic activity and investment," said Chris Jarvis, the IMF's mission chief in Cairo.
The IMF expects the economy to grow 3.8 percent in the fiscal year ending 30 June.
“This is a moment of opportunity for Egypt. The economy has begun to recover after four years of slow activity," Jarvis said at an economic consultation meeting. "Equally important, there is growing national consensus on the need for economic reform."
Egypt's economy has been hit by political instability and militant violence since a 2011 popular uprising ousted president Hosni Mubarak. It grew by 2.2 percent in the fiscal year which ended 30 June, just below the population's growth rate.
President Abdel-Fattah El-Sisi raised fuel prices by up to 78 percent last summer in a bid to reign in the budget deficit which reached 12.8 percent of GDP in the last fiscal year. The government also announced plans to reform laws and regulations governing investment by the end of 2014.
“Energy sector reforms and sizeable investments will be critical to reduce energy supply bottlenecks and raise potential growth," Jarvis said."The megaprojects offer prospects for jobs and growth but should be carefully designed and monitored to limit potential fiscal risks, for example if they entail additional public investment or large contingent liabilities.”
The IMF forecastbudget deficit to reach about 11 percent of GDP in the current fiscal year."In 2015/16, it will be important to keep expenditure in check, including through continued subsidies reform to reduce the budget deficit below 10 percent of GDP," according to Jarvis.
The proposed increases in government spending on health and education are expected to protect the poor and support long term growth, Jarvis said.
Egypt's constitution commits the state to spending a minimum of three percent of national income on public healthcare and six percent on education and one percent on scientific research. Spending on health grew by 26.5 percent and on education by 13 percent in the 2014/15 fiscal year.
Following the uprising in 2011, Egypt entered into several rounds of negotiations with the IMF to get a $4.8 billion loan, but it never materialised. After the ouster of president Mohamed Morsi in July 2013, oil rich gulf countries granted Egypt $10.6 billion in cash and oil products, relieving the need for an IMF facility.
"The authorities are also seeking to improve Egypt's external position, though additional external financing will still be needed through the medium term," Jarvis said.
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