By: Gazette Staff CAIRO, May 18, 2018 - The IMF and the Egyptian Government have reached a staff-level agreement on the third review of Egypt's economic reform programme, which is supported by the IMF's $12 billion arrangement, a senior Fund official said on Friday. Mr. Subir Lall, who visited Egypt on May 2-17 to conduct the third review for the government's reform programme, supported by a three-year Extended Fund Facility, said Egypt had begun to reap the benefits of its ambitious economic reform programme. While the process has required sacrifices in the short-term, the reforms were critical to stabilise the economy and lay the foundation for strong and sustained growth that will improve living standards for all Egyptians, Mr. Lall wrote in his report. "Egypt's growth has continued to accelerate during 2017/18, rising to 5.2 per cent in the first half of the year from 4.2 per cent in 2016/17. The current account deficit has also declined sharply, reflecting the recovery in tourism and strong growth in remittances, while improved investor confidence has continued to support portfolio inflows. In addition, gross international reserves rose to $44 billion by end-April, equal to 7 months of imports," he wrote. "Annual headline inflation has declined from 33 per cent in mid-2017 to around 13 per cent in April, anchored by the well-calibrated monetary policy of the Central Bank Egypt (CBE). The CBE remains committed to reducing inflation to single digits over the medium term, with monetary policy underpinned by a flexible exchange rate regime that is critical for maintaining competitiveness and adjusting to external shocks. Egypt's banking sector remains liquid, profitable and well-capitalised. "Egypt is on track to achieve a primary budget surplus excluding interest payments in 2017/18, with general government debt as a share of GDP expected to decline for the first time in a decade. The budget for 2018/19 targets a primary surplus of 2 per cent of GDP, which would keep public debt on a firmly downward path," he added. The government also remains committed to continuing energy subsidy reforms to achieve cost-recovery prices for most fuel products by 2019. Together with raising revenues through tax policy reforms, this will help create fiscal space for important infrastructure projects, targeted social protection measures and essential spending on health and education. "The government continues to move forward with structural reforms to modernise the economy and tap the potential of Egypt's growing population. This includes steps to support exports and reduce non-tariff barriers, streamline and enhance industrial land allocation process, support small and medium enterprises, strengthen public procurement, improve transparency and accountability of state owned enterprises, and tackle corruption. These reforms will help attract private investment, which is essential to raise growth and make it more inclusive," Mr. Lall wrote in his report. "Strengthening the social safety net remains a top priority for the Egyptian authorities and is strongly supported by the IMF, Mr. Lall wrote in his report. The Fund welcomes the plan to further expand the "Takafol" and "Karama" programmes to help protect Egypt's most vulnerable. The school meals programme for children as well as expansion of child care centres also aim to increase women's participation in the labour force, which will be essential to sustaining strong and inclusive growth over the medium term.
