CAIRO
The International Monetary Fund commended Egypt’s commitment to economic reforms in a report on Tuesday, but warned against potential risks including a premature loosening of monetary policy and worsening security conditions.
In its second review of a $12 billion reform programme it signed with Egypt in late 2016, the IMF raised its forecast for Egypt’s GDP growth for the 2017/18 fiscal year ending in June to 4.8 per cent from 4.5 per cent in a previous review.
“Egypt’s economic outlook is favourable, provided prudent macroeconomic policies are maintained and the scope of growth-enhancing reforms is broadened,” the report said.
Egypt’s economy has been struggling since a 2011 uprising drove tourists and foreign investors away, but economic reforms tied to the three-year IMF programme agreed in late 2016 are aimed at putting the country on the right track.
The IMF said it expected inflation to fall to 12 per cent by June and single digits by 2019 from around 20 per cent currently.
Inflation surged in the months after Egypt floated its currency in November 2016, hitting a high of around 35 per cent in July, but has since eased.
The IMF saw Egypt’s current account deficit falling to 4.5 per cent of GDP this fiscal year from about 6 per cent last year on the back of new gas production and a tourism recovery.
Egypt is expected to reduce arrears to international oil companies, which stood at around $2.4 billion last June, to about $1.2 billion by July and to eliminate them by July 2019.
The IMF expected the fuel subsidy bill to decline to 2.4 per cent of GDP this fiscal year from 3.3 per cent last year.
It said Cairo was committed to fuel prices hikes by the end of 2018, with the timing of another increase to be discussed after the next review. Egypt aims to eliminate fuel subsidies entirely by the end of the programme, the IMF said.
