Is Egypt Government Ready for the upcoming IMF Review

IMF is now going to Review the economic progress of Egypt. Recently, there have been protests in Egypt against bread rationing. This event reflects the country’s demographics, with a significantly large population of people living the poverty line.

Because of this, it is turning out to be a situation where any indication of cuts in supply of their daily staple is being unaccepted by the citizens.

Battle of Subsidy in Egypt

As significant number of Egypt population lives under the poverty line, citizens are not happy with a cut in their daily supply for staple and are not accepting it. The standard of living has been on a rise in Egypt following the subsidy in Fuel subsidies since November 2016. This resulted in increasing Inflation.

Inflation has risen as a result, with core inflation, which excludes volatile items, outperforming headline inflation. The increase in Inflation in Egypt along with high poverty among its citizens are severely effecting the purchasing power of a common man. This economic scenario is hurting nation’s intentions of promoting inclusive growth.

Recent Economic Reforms

After the revolution of 2011, which resulted in the outcast of Hosni Mubarak from the nation’s government, Egypt is still trying to get hold on its feet economically. The rate of inflation is increasing and poverty does not seem to decrease as well. The rise in Inflation and poverty is leading to slow economic growth in the country.

To assist Egypt in this crisis situation and to support its efforts towards Inclusive growth and structural reforms, the International Monetary Fund (IMF) had provided a Financial assistance package of $12 billion loan program for three years starting in November 2016.

This Financial assistance is said to be the biggest on record assistance given by IMF for its type for the Middle East. After the announcement, Egypt, received $2.75 billion as part of first tranche immediately provided by the IMF.

IMF Reviews Egypt

For the financial assistance provided, the IMF will conduct 5 reviews on the Egypt’s economical progress over the course of the period for which the assistance is being provided, i.e., 3 years.

Under this review, IMF will review the progress on promises made by Egypt Government in exchange of financial assistance provided to them. The first of such review is going to take place in April.

Observations made by IMF

Among the promises made by Egypt for the loan is a point which states, Reduction in Fuel Subsidies. The IMF has observed that while rising fuel and power prices reduced the subsidy cost by 3% of GDP in fiscal year 2014-15, the pace of reforms slowed in 2015-16. In Egypt, the fiscal year begins in July and concludes in June of the next year.

In a report, it is said that, “to issue additional tranches, the agency will seek further hikes in fuel prices, among other measures”. As was the case with Tunisia, insufficient progress in the country’s economy may result in a halt on the issuance of additional loan tranches.