High exports and low growth. The International Monetary Fund gives its forecasts for the future of the Egyptian economy
International Monetary Fund officials had expected Egypt’s oil and gas exports to rise by 30.6% in the current fiscal year ending June 30, 2023, to $23.5 billion.
The International Monetary Fund report called for the need to reduce gasoline subsidies and provide subsidies for kerosene and diesel instead of gasoline, emphasizing that subsidies are limited to food and fuel consumed by the poor, in addition to providing cash assistance to groups most in need.
The IMF called for the phasing out of inefficient and non-targeted fuel subsidies through more stringent application of automatic pricing mechanisms for petroleum products to align domestic energy prices with international fuel prices while launching targeted cash subsidies; The latter requires investments to improve the social situation in order to identify the most vulnerable groups. The Fund indicated that other accompanying measures should be considered (eg public transport subsidies) and the communication strategy should explain the benefits of energy subsidy reform.
The International Monetary Fund lowered its forecast for the growth of the Egyptian economy to 4% in the current 2022/2023 financial year, instead of 4.4% in forecasts last October.
International Monetary Fund officials have indicated that new funding from the International Fund to Egypt will encourage more foreign investment in Egypt and the sale of some shares in state-owned companies.
The International Monetary Fund said that Egypt’s public fiscal policy is aimed primarily at reducing high public debt and overall financing needs by controlling the state of public finances and managing debt effectively.
Asked about rising inflation in Egypt as a result of a new program with the IMF that increased food prices by 40%, the fund added that the liberalization of the exchange rate has affected low-income families in Egypt, and as a result, Egypt has approved special support for limited groups, and that support should reach those who deserve it.
The Fund indicated that monetary policy has a role to play in containing inflation in Egypt and shifting policy impacts on the exchange rate, and as a result of these measures, the Central Bank of Egypt will be able to reduce inflation through monetary policy measures.
He explained that the purpose of the Egyptian government’s cooperation with the International Monetary Fund is to strengthen the social safety net, stressing that Egypt is open to using proceeds from the sale of shares of state-owned companies to reduce public debt.