IMF urges Egypt to move faster on asset sales to create jobs

Egypt must be even more ambitious in its efforts to bolster growth and employment prospects as its economic picture gradually improves, the International Monetary Fund said on Tuesday.

The Egyptian government should in particular move forward with plans to sell state assets and work towards “decisively reducing the role of the public sector in the economy,” IMF officials said following meetings in Cairo from May 6 to 18.

“It is critical for Egypt to carry out deeper reforms to unlock the country’s growth potential, create high-quality jobs for a growing population and sustainably reduce its vulnerabilities and increase the economy’s resilience to shocks,” said Ivanna Vladkova Hollar, the IMF’s division chief for the Middle East and Central Asia who led the visit to Egypt.

The IMF and Egypt entered a four-year agreement in December 2022 that was slated to yield $3 billion of loans for the struggling nation. That commitment was increased to $8 billion in March 2023 as currency volatility and disruptions to Suez Canal shipping further destabilised the Egyptian economy.

This month’s IMF visit was part of the fifth review of the extended fund facility programme. About $3.2 billion has been disbursed so far. 

Vladkova Hollar praised the Egyptian authorities for making “substantial progress” toward ensuring macroeconomic stability and applying “greater fiscal prudence”, especially on large infrastructure projects.

The IMF has upgraded its growth forecast for fiscal year 2024-25, which runs until June 30, to 3.8 percent. 

The share of private investment jumped to 60 percent in the first half of this fiscal year from 38.5 percent in the same period last year. 

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Despite some fluctuations, inflation remains on a downward slope, but Egypt still contends with a large current account deficit “as rising imports, reduced hydrocarbon output and Suez Canal disruptions offset strong tourism, remittances and non-oil exports”.

Tax reforms are starting to have an impact but the government needs to widen the tax base and reduce exemptions, according to Vladkova Hollar. 

Egypt’s privatisation of assets has a “critical role” in paving the way for a stronger private sector.

As part of this push, the country agreed in March with the International Finance Corporation, the World Bank’s private sector arm, to allow private investment and management of 11 airports. 

Rania Al Mashat, Egypt’s economic development minister, said last month that the aviation divestment plan was a “game-changer”.

However, the planned sale of scores of state-owned enterprises has been slow to get started.