The International Monetary Fund (IMF) delegation has reached a staff-level agreement—subject to approval by the IMF’s Executive Board—on the second $2b tranche disbursement of the $12bn loan, bringing total disbursements under the programme to $8bn.
The agreement came after the fund’s third review of Egypt’s economic reform programme during the delegation’s visit to Cairo from between 2-17 May, according to a press statement issued on Thursday.
“Egypt has begun to reap the benefits of its ambitious and politically difficult economic reform program. While the process has required sacrifices in the short-term, the reforms were critical to stabilising the economy and lay the foundation for strong and sustained growth that will improve living standards for all Egyptians.,” said Subir Lall, head of the IMF delegation.
Furthermore, Egypt’s GDP growth continued to accelerate account for 5.2% during the first half of the fiscal year (FY) 2017/18, compared to the 4.2% in FY2016/17, the statement indicates. The increase in growth reflected the recovery in tourism and strong growth in remittances, as well as improved investor confidence.
In addition, gross international reserves rose to $44bn by end-April, equivalent to 7 months of imports.
On Annual headline inflation has declined from 33% in mid-2016 to 13% in April. According to the statement, Egypt’s banking sector remains liquid, profitable and well-capitalised.
Meanwhile, the statement cites government’s efforts to support exports, enhance industrial land allocation process, support small and medium enterprises, strengthen public procurement, improve transparency and accountability of state-owned enterprises, and tackle corruption.
Adding that such reforms will help attract private investment, which is essential to raise growth and make it more inclusive.
“Strengthening the social safety net remains a top priority for the Egyptian authorities and is strongly supported by the IMF. We welcome the plan to further expand the “Takaful” and “Karama” programs to help protect Egypt’s most vulnerable. The school meals program 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.” Said the IMF statement.
Egypt adopted its economic reform programme in 2016, which included currency flotation, resulting in the pound losing about 50% of its value, implementing the VAT, and reducing energy subsidies, which caused inflation to reach a historical sky-rocket high level of over 33% in July.