IMF head says recovery in Egypt now looking ‘strong’

Egypt’s economy is recovering under a three-year reform plan after the implementation of measures to ease inflation and float the currency, the International Monetary Fund said.

The IMF’s managing director Christine Lagarde underscored the importance of the country’s structural reforms to achieve more sustainable growth, according to a statement late on Sunday.

“Egypt’s economy is showing strong signs of recovery, and its economic growth is among the highest in the Middle East,” Ms Lagarde said.

The comments came after Ms Lagarde’s meeting with Egyptian president Abdel Fattah El Sisi in New York on Sunday. Egypt, North Africa’s largest economy, has been introducing an economic reform programme backed by a $12 billion (Dh44bn) loan from the IMF since late 2016.

Under the programme, Egypt made deep cuts to energy subsidies, introduced new taxes and floated its currency as part of measures intended to overhaul the economy, boost investor confidence and restore stability to capital markets.

Inflation has eased after reaching more than 34 per cent following the November 2016 decision to depreciate the Egyptian pound.

Monthly inflation in August decreased to 1.8 per cent from 2.4 per cent the previous month, according to Capmas, the state-run statistics agency, its slowest pace since the government began enacting another round of subsidy cuts and interest rate increases.

The annual inflation rate accelerated to 14.2 per cent compared to 13.5 per cent in July – near the central bank’s target range of about 13 per cent.

The float and accompanying reforms have helped to revive the economy and boost investor confidence.

In August, Moody’s Investors’ Service raised Egypt’s credit outlook from stable to positive, citing progress in implementing the IMF-backed programme to bolster growth. The country’s long-term rating remained at B3, six levels below investment grade.

A recovery in Egypt’s vital tourism industry and an increase in remittances from Egyptians working abroad, combined with the currency float and economic reforms, have prompted S&P Global Ratings to raise the country’s credit rating. In May, it upgraded its long-term rating by one notch to B, or five levels below investment grade, citing improving economic growth.

Ms Lagarde said she agreed with Mr El Sisi on the “importance of capitalising on Egypt’s macroeconomic gains to advance the authorities’ homegrown structural reforms.”

“These reforms will help achieve more sustainable, inclusive and private-sector led growth which will help create jobs for Egypt’s young population, while also ensuring adequate resources are available for social protection,” Ms Lagarde said.