Published On: Thu, Feb 12th, 2015

IMF says Egypt’s Reforms Starting to Show Results, But Much More Still Needed to Heal the Economy

Egypt is not ready to accept the terms the IMF would place on a sizeable loan.

Egyptian Minister of Investments Ashraf Salman

The International Monetary Fund said on Wednesday that Egypt’s new economic reforms are beginning to yield positive change, moving away from the drama and rancor that started in 2011, Reuters reported

Investments and tourism have been down for the past four years in Egypt, with growth staying below 2 percent.

The General Abdel Fattah al-Sisi government has launched several reforms, and turned to the IMF for an assessment of Egypt’s financial and economic situation, hoping, of course, for a positive report that would attract foreign investments and loans.

“The measures implemented so far, along with some recovery in confidence, are starting to produce a turnaround, ” the IMF said in a press.

But the IMF Mission Chief to Egypt, Chris Jarvis, insisted Egypt still had to create jobs in order to combat its unemployment rate of 13 percent.

“The most important economic priority for Egypt is jobs, ” Jarvis told reporters. “Egypt needs to find a way of creating good jobs for its people while at the same time reducing its budget deficit and maintaining foreign exchange reserves.”

The IMF believes Egypt’s economy could grow as much as 3.8 percent in 2015, possibly rising to 5 percent. However, as exciting as these figures may look, they won’t be enough to create adequate employment for its fast growing population.

The IMF also emphasized that all those nice numbers will still depend on Egypt’s managing to bring its budget deficit to below 8 percent of GDP by 2019. If they do that, it should “support the targeted reduction in inflation to 7 percent.”

Except that without budget deficits the Egyptian government won’t be able to foster the infrastructure needed to attract foreign investment. Its GDP only grew 2.2 percent last year, and when Prime Minister Ibrahim Mehleb promises it will reach as high as 4 percent this year — well, you need to take it with a grain of salt.

Egypt is not ready to accept the terms the IMF would place on a sizeable loan—the country needs about $4.8 billion to give its economy the boost it needs so badly. But Egyptian Finance Minister Hani Kadry Dimian said on Wednesday that there’s no such deal coming any time soon.

This is because the measures the IMF will demand include enhanced taxation, further cut in subsidies, a new VAT, fixing the currency rate (it’s way over-valued), curbing the black market (which offers real value in currency exchanges) — to name a few.

If Greece balked at similar demands from the EU — you think Egypt will do it? Think again.

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