IMF reaches ac­cord with Egypt on $4.8 bil­lion Stand-by Ar­range­ment

The Pak Banker - - Front Page -

WASHINGTON

An In­ter­na­tional Mon­e­tary Fund (IMF) staff mis­sion headed by Andreas Bauer, Di­vi­sion Chief in the Mid­dle East and Cen­tral Asia De­part­ment and the Egyp­tian au­thor­i­ties have reached a staff-level agree­ment on a 22month Stand-By Ar­range­ment (SBA) in the amount of about US$4.8 bil­lion (equiv­a­lent to about SDR 3.16 bil­lion, or 335 per­cent of Egypt's quota in the IMF).

The SBA will sup­port the government's eco­nomic pro­gram through fis­cal year 2013/14. Egypt's re­quest for an SBA is ex­pected to be submitted to the IMF Ex­ec­u­tive Board for ap­proval in a few weeks.

Mr. Bauer in Cairo at the con­clu­sion of the staff mis­sion said the Egyp­tian au­thor­i­ties have devel­oped a na­tional pro­gram that seeks to pro­mote eco­nomic re­cov­ery, ad­dress the coun­try's fis­cal and bal­ance of pay­ments deficits, and lay the foun­da­tion for rapid job cre­ation and so­cially balanced growth in the medium term.

The poli­cies con­tained in the au­thor­i­ties' pro­gram will help ad­dress Egypt's press­ing eco­nomic and so­cial chal­lenges, and re­duce vul­ner­a­bil­i­ties. The IMF mis­sion wel­comes the pro­gram and will pro­pose a 22-month SBA in the amount of about US$4.8 bil­lion (equiv­a­lent to about SDR 3.16 bil­lion) to sup­port its im­ple­men­ta­tion.

Fis­cal re­forms are a key pil­lar un­der the pro­gram. The au­thor­i­ties plan to re­duce waste­ful ex­pen­di­tures, in­clud­ing by re­form­ing en­ergy sub­si­dies and bet­ter tar­get­ing them to vul­ner­a­ble groups.

At the same time, the au­thor­i­ties in­tend to raise rev­enues through tax re­forms, in­clud­ing by in­creas­ing the pro­gres­siv­ity of in­come tax­a­tion and by broad­en­ing the gen­eral sales tax (GST) to be­come a full-fledged value added tax (VAT).

The re­sources gen­er­ated will be used to boost so­cial spend­ing and in­fra­struc­ture in­vest­ment, and to grad­u­ally re­duce the large bud­get sec­tor deficit from al­most 11 per­cent in 2011/12 to 8.5 per­cent of GDP in 2013/14, while the bud­get sec­tor pri­mary deficit will de­cline from 4 per­cent in 2011/ 12 to 0.6 per­cent in 2013/14 and is pro­jected to turn pos­i­tive in the fol­low­ing fis­cal year. The en­vis­aged deficit re­duc­tion will help al­le­vi­ate the pub­lic debt bur­den and free up fi­nanc­ing to sup­port so­cial spend­ing and pri­vate sec­tor growth. The at­tain­ment of the fis­cal ob­jec­tives un­der the au­thor­i­ties' pro­gram will be fa­cil­i­tated by mea­sures to strengthen pub­lic fi­nan­cial man­age­ment and the trans­parency and accountability of pub­lic sec­tor op­er­a­tions.

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