IMF sees inflation, subsidies as challenges: Pharos Holding

CAIRO – 27 September 2017: The International Monetary Fund (IMF) flagged high inflation and fiscal pressures from the energy subsidies as main challenges facing the Egyptian government, research firm Pharos Holding said in a Wednesday note.

Commenting on the IMF’s first review for Egypt after sealing the $12 billion loan, Pharos Holding’s economist Ramy Oraby said that the fund has stressed on the importance of taking further structural reforms.

“The IMF highlighted that the difficult steps have already been taken, reiterating that the implemented fiscal and monetary reforms were vital,” Oraby said.

Pharos Holding took note that the IMF doesn’t support the Egyptian government’s move to raise some import tariffs in December 2016, and the action taken in June to reduce subsidies for LPG cylinders.

The IMF published Tuesday its first staff report 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.