Kristalina Georgieva, Managing Director of the International Monetary Fund, praised the difficult economic reforms Egypt has implemented amid regional turmoil, during her visit to the country ahead of a review of the $8 billion loan agreement.
Georgieva said during a televised press conference in the New Administrative Capital that Egypt has shown “clear resilience” in difficult times, and that recent steps have provided its economy with “strong buffers” against external shocks.
Her statements came in the presence of Prime Minister Mostafa Madbouly, who announced that the IMF will begin the fourth review of the Egyptian program tomorrow, Tuesday.
Georgieva's visit comes amid increasing focus on Egypt's expanded agreement with the Fund, which is considered a key part of a $57 billion global rescue package for a country considered a major player in the Middle East. In March, Egyptian authorities allowed the pound to depreciate by about 40% against the dollar to secure the agreement, and have since reduced subsidies on bread, fuel and electricity in a series of cost-cutting measures.
However, Egypt has indicated in recent weeks that it is seeking to review the goals and timelines of the agreement, citing the increasing pressures on its population of 107 million people, as a result of the ongoing conflicts in the region.
Review discussions are expected to include Egypt's progress in maintaining a flexible exchange rate, and its plans to sell more than two dozen state-owned assets. The agenda will also include discussions about possible amendments to the value-added tax, as the Fund indicated in the August report that the authorities identified 19 of 58 exemptions that may be canceled to increase revenues without raising the tax rate.
According to the International Monetary Fund, Egypt can generate additional revenues equivalent to 1% of GDP within 12 months by reforming the value-added tax. The Fund indicates that these amendments must be presented to the Egyptian Parliament during this month. However, it is not yet clear whether the government will request a postponement of the value-added tax reform, given its potential impact on the cost of living.
The authorities are also working to collect comprehensive data to measure the impact of currency and spending cuts on Egyptian families over the past two years. The Fund is scheduled to discuss existing social protection programs to protect the most vulnerable groups based on data provided by Egypt.
Georgieva noted that the subsidy cuts will allow the government to redirect funding to the country's most needy groups.
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