Egypt will have to deepen its IMF-backed reforms and better encourage private sector growth
Egypt is halfway into a three-year $12 billion IMF loan programme it signed in late-2016 tied to tough austerity measures, and is hoping severe reforms, which to date include included a currency float that halved the value of its pound, deep cuts to fuel and electricity subsidies and a new value-added tax, will lure back foreign investors.
As part of an IMF visit to review Egypt’s reform programme, David Lipton, First Deputy Managing Director praised Egypt’s progress but said that a broadening and deepening the reform agenda is crucial to take advantage of ripe global conditions, according to a Reuters report.
The already-implemented reforms have helped push inflation in the import-dependent country to as high as 33 per cent in 2017; price rises have cooled, with headline inflation easing to 13.3 per cent in March, its lowest rate since May 2016, clearing the way for further subsidy cuts and lower interest rates.
According to Reuters, the reforms need to move further, particularly with measures aimed at scaling back the country’s sprawling public sector to allow for dynamic private sector growth, Lipton added, calling for slashing domestic industry protections that have kept local companies from entering the global supply chain.
The IMF has forecast that Egypt will grow by 5.2 per cent this fiscal year, up from about 4.1 per cent a year earlier.
But Lipton said that if Egypt can tap the potential of its youth and bring labour force participation to the level of other emerging market countries, their absorption into the economy could boost growth by an estimated six to eight per cent.