IMF Chief Hails Egyptian Reforms Ahead of $8 Billion Deal Review
The International Monetary Fund’s chief hailed Egyptian moves to enact difficult economic reforms amid regional turmoil, as she visited the North African nation ahead of a review of its $8 billion loan deal.
Egypt has shown “remarkable strength” in challenging times, and recent steps have provided its economy with “strong buffers” against external shocks, IMF Managing Director Kristalina Georgieva said Sunday in a televised briefing at the country’s new administrative capital.
She spoke alongside Prime Minister Mostafa Madbouly, who said the IMF would begin its much-anticipated fourth review of Egypt’s program on Tuesday.
Georgieva’s visit comes amid heightened focus on Egypt’s expanded IMF agreement, a cornerstone of a global $57 billion bailout for a country seen as a key power-broker in the Middle East. Egyptian authorities allowed the pound to plunge nearly 40% against the dollar to secure the pact in March, and have since slashed subsidies on bread, fuel and electricity in a series of cost-cutting measures.
In recent weeks, however, Egypt has signaled it’s seeking to revise the targets and timelines of the deal. Authorities have cited mounting pressures on the country’s 107 million population as Israel’s year-long conflicts with Hamas and Hezbollah send economic shockwaves across the region.
As the IMF meetings gear up, topics of discussion are likely to include Egypt’s progress both on maintaining a flexible exchange rate and in its plans to sell off more than two dozen state-owned assets.
Potential changes to value-added tax will also be on the agenda. The IMF said in an August report authorities had identified 19 of 58 VAT exemptions it might cancel. That would help it boost revenue without hiking the rate.
Egypt would be able to generate the equivalent of 1% of gross domestic product in extra revenue over a 12-month period by reforming the tax, according to the lender, which says changes should be presented to Egypt’s parliament this month. It’s not clear if VAT reform is one of the steps the government will ask to be delayed, given its likely impact on living costs.
Authorities are also compiling a wide-ranging survey to gauge the impact of two years of devaluations and spending cuts on Egyptian households. The IMF is set to discuss the social protection programs in place to shield the most vulnerable, based on the data Egypt presents.
Georgieva said Sunday that Egyptian subsidy cuts will allow the government to redirect funding to the country’s neediest.
