Positive IMF review paves way for $2bn transfer to Egypt

Bank governors and finance ministers pose for a photograph before the start of an International Monetary and Financial Committee (IMFC) meeting. The IMFC is an advisory body to the IMF. (Reuters)

CAIRO: The latest review by the International Monetary Fund has found that Egypt’s economic reforms are on track, paving the way for the transfer of another $2 billion loan disbursement, part of a three-year, $12-billion bailout loan to support the country’s battered economy.
The IMF said the transfer would bring the total payout to Egypt since it secured the loan in November 2016 to $6.08 billion. Egypt expects the payment to be made by January.
“Egypt’s reform program is yielding encouraging results. The economy is showing welcome signs of stabilization,” the Washington-based lender said in a statemen. It hailed the country’s recovering GDP growth, the moderation of inflation and an increase in foreign reserves to more than $36 billion, their highest level since 2011. The IMF announced the completion of the review on Wednesday.
Egypt’s inflation rate declined to 25.98 percent in November, the central bank announced earlier this month, down from 30.82 in October. President Abdel-Fattah el-Sisi, who masterminded the politically sensitive reforms, said in September that the government is targeting an inflation rate of 13 percent by the end of 2018.
The government last summer raised electricity charges by more than 40 percent and hiked gasoline prices by up to 55 percent while doubling the price of gas canisters used for cooking. The hikes were part of the reforms introduced so the country can be eligible for the IMF’s loan.
Economic reforms, mostly reduction in state subsidies on basic commodities, started shortly after el-Sisi took office in 2014 but they were accelerated last year.
Among other measures taken to vitalize the economy are the introduction of value added tax, or VAT, and the floatation of the currency that led to the Egyptian pound’s loss of half its value and triggering a significant hike in prices.
The reforms have hit poor and middle class Egyptians the hardest, stoking popular discontent but no major street protests. Previous Egyptian governments had been reluctant to lift or reduce state subsidies on key commodities, fearing that would lead to political unrest.
Egypt’s economy has been battered by years of political turmoil since the 2011 uprising that ousted Egypt’s longtime autocrat Hosni Mubarak. Under el-Sisi, Egypt has been scrambling to secure foreign aid to kick start the economy and sought to revive the decimated tourism industry, a vital earner of foreign currency.
Egypt’s ambitious reforms have coincided with an expanding and emboldened insurgency by Islamic militant that is centered in the northern part of the Sinai Peninsula, placing a significant burden on resources and hurting Egypt’s image as a holiday destination.
Egypt last week announced the start of production from a gigantic gas field off its Mediterranean coast, a much heralded development that would give the economy a much needed boost. The field currently has an initial production capacity of 350 million cubic feet of gas per day and is expected to hit the 1 billion mark in June 2018.