Egyptian authorities sent a Memorandum of Economic and Financial Policies (MEFP) to the IMF on recent economic developments on 27 January, where the authorities expressed their readiness to take additional measures that may become necessary to achieve the programme’s goals.
“The objective of our programme is to further strengthen macroeconomic stability by reducing inflation and public debt, promote inclusive growth, create employment and private sector development, and protect the poor and vulnerable,” the authorities said over the MEFP which was declared by the IMF on Saturday.
Local policies have remained on track: all end-June 2018 and end-December quantitative performance criteria (PC) have been met, but a number of structural benchmarks were implemented with a delay or were missed, the authorities acknowledged.
As before, IMF resources are used for budget support and are maintained in government accounts at the Central Bank of Egypt (CBE), noted the authorities.
“We believe that the policies described in the MEFP are adequate to achieve the objectives
of our programme. We will monitor economic developments and performance. In accordance
with the fund’s policies, we will consult with the IMF on adoption of needed measures and in advance of revisions to policies,” the authorities said, adding that they will continue to supply the fund with timely and accurate data needed for programme monitoring.
The fifth and the final review is expected to be completed on or after June 20, 2019, the authorities added during its January MEFP that was signed by Tarek Amer, governor of the CBE, and Mohamed Moeit minister of finance.
Additionally, Performance under the programme was favourable, the staff report affirmed detected that all end-June 2018 and end-December 2018 performance criteria and indicative targets (IT) were met except for the end-June IT on the nominal accumulation of the budget sector debt (December data is not yet available), and the end-December IT on the clearance of the EGPC arrears given the fact that difference was paid in advance in 2017/18. However, debt to GDP ratios for both the central and general government in June 2018 were in line with projected targets under the programme.
Most structural benchmarks were also implemented, despite some delays. Specifically: the foreign exchange deposits of the CBE in foreign branches of the Egyptian banks have been reduced to $2.9bn by 30 June 2018, and further to under $1.5bn on 3 January 2019. A new system to evaluate and decide on new guarantees was finalised as planned in fiscal year 2017/18, and EGP 500m was spent to improve the availability of nurseries, asserted the report.
Among other benchmarks, a working group to prepare the reform plan for industrial land allocation
was formed with a delay in August due to the cabinet reshuffle; draft amendments to the CBE law were finalised and submitted to the cabinet in December instead of September as more time was
required in view of a much broader scope of the revisions than originally envisioned.
The draft law on the Egyptian Competition Authority (ECA) was submitted to parliament in January 2019 instead of October 2018, with the delay due to the need for extensive consultations with stakeholders.
Separating the regulatory authority for public transportation from the ministry of
transportation by establishing the independent regulatory authority for transport was not
completed by end-December 2018, and is proposed as a structural bench mark.
A prime ministerial decree to implement a fuel price indexation mechanism for all fuel products will be published in June, except 95-octane gasoline (a decree was already issued in December 2018), liquefied gas and fuel oil used in bakeries and electricity generation, the report noted.