Moody’s: IMF loan put Egypt on slow but steady upward track

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Sun, 02 Apr 2017 - 11:00 GMT

BY

Sun, 02 Apr 2017 - 11:00 GMT

Headquarters of the International Monetary Fund - Creative Commons via Wikimedia Commons

Headquarters of the International Monetary Fund - Creative Commons via Wikimedia Commons

CAIRO - 2 April 2017: The International Monetary Fund (IMF)’s Egypt program has improved the country’s fiscal and external position, although slowly, Moody's Investors Service said in a Wednesday

report

.

The implementation of the IMF program's targets, including reductions in fiscal deficits and government debt levels as well as improvements in Egypt's external liquidity position, will help address Egypt's “key credit challenges," the reported added, citing Steffen Dyck, a Moody's Senior Credit Officer and co-author of the report. "However, ambitious fiscal consolidation targets will be challenging to achieve and could face implementation risks in a scenario of mounting public discontent.”

Moody’s predicted Egypt’s budget deficit will dip to 11.0 percent of the country’s GDP in fiscal year 2017 and 8.5 percent in 2019, compared to a 12.6 percent deficit in the fiscal year 2016, the report added.

Moody is less optimistic than the IMF, which predicted the budget deficit to be at 10.0 percent in fiscal 2017 and to even contract to 6.1 percent in fiscal 2019, according to the report.

The Central Bank of Egypt had liberated the exchange rate last November. This came as a part of the government's reform plan aimed at clinching a three-year $12 billion loan from the IMF in an attempt to revitalize the Egyptian economy, which has been declining for the past six years, following 2011’s January 25 Revolution.

The Egyptian government embarked on implementing a set of economic reforms which included floating the currency, cutting electricity and oil subsides and applying a value-added tax.

Moody furthermore expected that Egypt's fiscal situation will continue to lapse, saying that current reforms adopted by the government and financially supported by the IMF will achieve slow but steady progress in terms of Egypt’s sovereign credit profile.

Consequently, Moody argued that the “current account deficit” will widen in 2017, expecting it to fall only in 2018 onwards due to the Egyptian pound's weaker value.

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