The International Monetary Fund (IMF) arrived Saturday for a 14-day visit to Cairo, during which time Egypt is expected to respond to IMF inquiries amid continued negotiations for a $12bn loan.
The visit is expected to finalise negotiations over the $12bn loan that Egypt hopes will support economic stability and sustainable growth.
Government sources have clarified that the IMF mission will request that the Egyptian government implement the capital gain tax (CGT) to increase the tax base and revenues.
The CGT on the sales of non-inventory assets was previously approved by President Abdel Fattah Al-Sisi in July 2014 as a part of an economic plan to broaden the tax base and introduce a more progressive taxation system. In May 2015, the CGT was put on hold for two years after investors criticised and protested against the tax and the stock market witnessed a sharp drop.
The sources added that the mission advised the Egyptian government that it should reduce domestic debt and also advised that the government start reducing public spending while improving tax collection efficiency in order to increase Egypt’s revenues.
The Central Bank of Egypt (CBE) announced earlier that the domestic debt has reached EGP 2.59tn between July and September in fiscal year (FY) 2015/2016. The domestic interest rate for FY 2016/2017 is projected to reach EGP 284.6bn.
The IMF mission will hold its first meeting with the CBE leadership during the visit. Daily News Egypt learned that the mission will meet with members of parliament and will hold meetings with various representatives of civil society organisations.
The Egyptian economy performance indicators, such as budget deficits, cash reserves, local CBE assets, and the loans obtained by the Egyptian government in the previous period, will be monitored by the IMF to ensure the government’s commitment.
Furthermore, Egypt’s Minister of Finance Amr El-Garhy told Daily News Egypt that the proposed economic programme to the IMF is the same programme that the government had agreed on, including reducing the budget deficit from 9.8% for the current FY to 8% in FY 2016/2017.
Similarly, IMF’s deputy spokesperson William Murray announced on Thursday that the amount of funding that the IMF will provide to Egypt depends on the result of the IMF’s evaluation of Egypt’s funding needs and the efficacy of the economic programme adopted by the Egyptian government.
An MP told Daily News Egypt that the government is willing to modify the economic programme in order to comply with the IMF’s requests. He added that the IMF is interested in an economic reform plan that is not harmful to low income citizens, and Egypt’s ability to repay the loan after the grace period.
MP Passant Fahmy told Daily News Egypt that the IMF mission will meet with parliament members, political party leaders, and some public figures to ensure consensus about the loan. She added that the IMF does not have any special requests for the Egyptian government.
Egypt has been suffering from a foreign currency crisis since the 25 January Revolution, as a result of declining tourism and foreign investments, which in turn forced the CBE to sell US dollars in bids. Egypt’s foreign currency reserves went from $36bn before the revolution to $17.5bn in June 2016.