The International Monetary Fund (IMF) has released a comprehensive report on Egypt’s commitment to addressing the government’s reliance on overdraft facilities from the central bank and off-budget public sector activities. The report, which was issued four weeks after the IMF approved an $8 billion financial support program for Egypt, highlights several weaknesses in the country’s economy.
One of the main issues addressed in the report is the central bank’s lending to public bodies. Egypt has taken steps to tighten monetary policy, implement a flexible exchange rate system, and raise gasoline and fuel prices since December 2022. However, these measures have not been enough to address the underlying problems in the economy. The Fund had suspended a previous support program of $3 billion due to errors in policy implementation. However, despite this setback, Egypt remains committed to addressing its economic challenges.
The report notes that a return to a fixed exchange rate in February 2023 had negative consequences for the economy. This move led to a shortage of foreign exchange, high inflation, and restricted imports due to the fixed exchange rate. Delayed interest rate increases and excessive investment in national projects have also contributed to inflationary pressures and exchange rate problems.
The central bank’s lending practices were also scrutinized, with significant lending to government bodies outside of the Ministry of Finance leading to inflationary pressures. To address these issues, Egypt has committed to limiting government overdrafts and preventing further lending from the central bank to government bodies. The central bank has already reduced its lending significantly since December 2022, but there is still work to be done.
In conclusion, the report outlines several challenges facing Egypt’s economy and measures being taken to address them. From monetary policy adjustments