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IMF praises Egypt stimulus plan, points to challenges ahead IMF welcomes Gulf-funded stimulus programme but insists on Egypt's need for economic restructuring
The IMF praised Egypt's stimulus plan to revive the economy and welcomed support for the cash-strapped country from friendly Arab states, but said introducing much needed reforms to restructure the economy remains a challenge Egypt's government is yet to tackle. Economic activity in Egypt has slowed since the popular uprising that toppled Hosni Mubarak in 2011, with sectors such as tourism and real estate being the hardest hit. Uncertainty about the country's political future since the overthrow of president Mohamed Morsi and ongoing security issues as the military cracks down on Islamist groups and their allies, has deprived Egypt of much needed investment. Growth in the Arab world's most populous nation was at a mere two percent in the fiscal year that ended in June, compared to the five percent average during Mubarak's last years in power. For 2014, the IMF forecasts a modest increase in growth to 2.8 percent, boosted by a $3.2 billion stimulus plan, which the government announced last month to create jobs and revitalise the stagnant economy. “Last year the growth rate was quiet sluggish. We think it will pick up because of the fiscal stimulus package the government is talking about, which will boost growth and jobs in the short term,” Masood Ahmed, director of the IMF's Middle East and Asia department, told Ahram Online at the fund's Washington headquarters. Saudi Arabia, the United Arab Emirates and Kuwait have pledged a total of $12 billion in loans, grants and fuel shipments to Egypt following Morsi's ouster in July. Asked how the IMF assessed Egypt's current stimulus plan and the Gulf money funding it, he said: “We do think it is good idea to come up with a plan that will provide stimulus in terms of investment and creating jobs in the short term and we believe the financing Egypt has received from GCC governments provides support for investment-based spending.” “However, the medium-term challenges facing Egypt remain the same... How to deal with public finance, narrow down the widening budget deficit and undertake the kind of reforms that will help to re-orient some of the government's own spending... These challenges are apparent and a plan of action needs to commence,” he added. Egypt must lift its fuel subsidies, which consume 20 percent of state spending. It must also reduce its budget deficit, which has risen to 14 percent in the year 2012/2013, nearly half of the government's spending. Fear of a popular backlash against such austerity measures has kept successive governments from introducing reforms. In August, Finance Minister Ahmed Galal said the government would spend $3.2 billion on labour-intensive projects and services to help poor sections of society. There are also plans to build roads and railways as well as water and sewage treatment plants and to invest in low-income housing and extending natural gas to homes and utilities in industrial areas, especially in Upper Egypt. http://english.ahram.org.eg/News/83852.aspx
