Egypt to review economic updates with IMF, WB in Washington

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Tue, 10 Oct 2017 - 12:36 GMT

BY

Tue, 10 Oct 2017 - 12:36 GMT

IMF headquarters- Reuters

IMF headquarters- Reuters

CAIRO – 10 October 2017: The Egyptian official delegation, attending the annual meetings of the World Bank and the International Monetary Fund (IMF), will discuss the latest updates in the economic reform program.

The delegation will also arrange the agenda of the IMF’s delegation, which will visit Egypt in October toreview and discuss methods of providing technical assistance to Egypt and the Ministry of Finance in the upcoming period, the ministry said in a Tuesday statement.

Minister of Finance Amr El-Garhy is set to leave Egypt to Washington D.C. Tuesday, along with Deputy Minister of Finance for Fiscal Policies Ahmed Kouchouk and Deputy Minister of Finance for Budget Affairs Mohamed Maeet.

Garhy is scheduled to meet IMF managing director Christine Lagarde and director of the IMF's Middle East and Central Asia Department, Jihad Azour, to review the economic developments in Egypt.

The Minister of Finance will also meet World Bank officials, to discuss methods of supporting Egypt’s development programs, as well asofficials from international rating agencies Moody’s, Fitch and S$P Global.

Governor of the Central Bank of Egypt Tarek Amer traveled Sunday for Washington on a three-day visit for the annual meetings, heading the Egyptian delegation.
Minister of Investment Sahar Nasr will also head to the U.S. this week.

In late September, the IMF published its staff report of their first review, including updated macroeconomic projections based on the recent developments of the Egyptian economy.

Egypt’s current account deficit is seen to improve to 4.6 percent of the GDP in the current fiscal year, and 3.8 percent in the next fiscal year, the IMF said.

“Improved competitiveness from depreciation and productivity gains from the reforms are expected to support exports and contain imports, while tourism is projected to recover as security conditions improve,” the IMF’s report stated.

Some economic indicators have gone far from the IMF’s expectations. The GDP growth rate for fiscal year 2017/18 and 2018/19 are forecasted to stand at 3.5 percent and 4.5 percent respectively “because of weaker than expected growth in the second half of 2016,”it said.

Egypt’s real GDP growth for fiscal year 2017/18 is expected by International Monetary Fund to record 4.5 percent, compared to their original prediction of 4.8 percent, the IMF said.

The macroeconomic indicators of the IMF stated that consumer prices are seen to mark an average of 22.1 percent in FY 2017/18, up from a previous forecast of 13.3 percent. In the previous fiscal year, the prices recorded an average of 23.9 percent increase, up from 18.2 percent in their original expectations.

The gross debt for the current fiscal year is expected to reach 87.7 percent of GDP, down from previous forecast of 89.1 percent, while for FY 2016/17, the gross debt came at 98.4 percent of GDP, compared to 93.8 percent of GDP.

Budget revenues and grants would comprise 18.8 percent of GDP in the current fiscal year, compared to 18.2 percent in FY 2016/17, which came lower than estimates of 20.7 percent of GDP.

With regard to expenditures this fiscal year, it is expected to stand at 27.3 percent of GDP, slightly higher than expected rate of 27.2 percent, which is also more than 28.7 percent of GDP estimated by the IMF for FY 2016/17.

Energy subsidies contribution in the GDP of FY 2017/18 was revised by the IMF to be 3.1 percent, compared to their prediction of 1.4 percent. In the previous fiscal year, the contribution came at 3.9 percent, up from 2.9 percent as per the IMF figures.

On the monetary sector level, reserves money is seen to shape 24.5 percent of the GDP in the current fiscal year, compared to 18.9 percent in the initial prediction. In FY 2016/17, the reserves estimates came at 26.8 percent, compared to 16.1 percent.

As stated by the IMF in its staff report of their first review, Egypt will witness a leap in its revenues at the end of the IMF’s Extended Fund Facility program as it is expected to record LE 1.715 trillion ($972 billion) in fiscal year 2021/22, compared to a revised figure of LE 752 billion in FY 2016/17.

Over the near-term, the government revenues are expected to close at LE 752 billion, well less than the estimates put for the LE 979.4 billion in the current fiscal year, compared to LE 877.8 billion in the IMF’s previous estimates.

As for subsidies, grants and social benefits, the IMF revealed the government’s commitment in that file as this item is expected to record LE 440.3 billion and LE 431.1 billion in the current and next fiscal years respectively, compared to LE 375.6 billion and LE 401.5 billion in the previous estimates.

The IMF stated that a significant progress has been made on structural reforms, appearing in energy subsidy reform, wage restraint, and the new VAT, which have all contributed to “reducing the fiscal deficit and helped free up space for social spending to support the poor,” said David Lipton, first deputy managing director and acting chair of the IMF.

Applauding the Central Bank of Egypt (CBE) efforts, the IMF said that the CBE has succeeded in mitigating foreign currency shortages, stabilizing exchange rates and eliminating the parallel dollar market.

“The foreign exchange (FX) market normalized after the float, but the depreciation was larger than expected,” the IMF said, stressing that the parallel market has virtually disappeared and central bank reserves have increased significantly.

The unification of the exchange rate and elimination of FX shortages has attracted informal trade into formal channels, the IMF said, adding that this was reflected in strengthening the trade balance. “The current account deficit in FY 2016/17 is expected to reach 5.8 percent of GDP, which is 0.6 percentage points of GDP more than in the program,” it said.

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