Econostrum | Economic News in the Mediterranean

IMF urges Egypt to speed up fiscal and structural reforms

Written by Frédéric Dubessy on Thursday, July 28th 2022 à 15:45 | Read 395 times

Egypt imports 80% of its wheat from Ukraine and Russia (photo: DR)
Egypt imports 80% of its wheat from Ukraine and Russia (photo: DR)
EGYPT. On Tuesday 26 July 2022, the International Monetary Fund (IMF) estimated that Egypt must make "decisive progress" in fiscal and structural reforms. In its latest assessment, the Bretton Woods institution's executive board considers them essential to "boost economic competitiveness, improve governance and strengthen its resilience to shocks".
As part of a $5.2 billion (€5.13 billion) stand-by arrangement Egypt obtained in 2020 from the IMF to counter the effects of the pandemic, an evaluation was carried out after the last tranche was disbursed in June 2022. It "should inform ongoing discussions on the Fund's future engagement with Egypt," said a statement from the institution. The IMF had, at the beginning of July 2022, indicated that it was continuing its discussions with Egypt in order to agree on an extended financing facility to support its political and economic reforms.
This request for an extended financing facility to accompany its comprehensive economic programme was made in March 2022. According to the IMF, Egypt "remains vulnerable because of its high public debt and large gross financing needs". Officials say that reforms must also accompany private sector development and reduce the role of the state.

Hope for grain deliveries

With annual inflation exceeding 13%, the country is facing new pressure on an economy already affected by the consequences of Covid-19. It is now also disrupted by the ongoing conflict in Europe, including reduced deliveries of sunflower oil and grain from Russia and Ukraine.
Visiting the Egyptian capital on Sunday 24 July 2022, Sergei Lavrov was keen to reassure his counterpart Sameh Choukri. The head of Russian diplomacy "confirmed the commitment of Russian exporters of grain products to respect all their obligations".

This declaration is based on the signature, on Friday 22 July 2022 in Istanbul under the aegis of the UN, of an agreement between Russia and Ukraine for the creation of "secure corridors" intended to ensure the free movement - thus without military attacks - of merchant ships in the Black Sea. Twenty to twenty-five million tonnes of grain, blocked for months by the war, could thus be released and exported again, particularly to Africa.

80% of Egyptian wheat comes from Russia and Ukraine. At the end of March 2022, Bruno Le Maire, French Minister of the Economy, promised to help Cairo. "We will be at Egypt's side to ensure that it obtains the wheat it may need in the coming months," he said at the time.

Expansion of the state's financial aid programme

In response to the food crisis, Egyptian President Abdel-Fatah al-Sissi announced that he was including one million new families in a social assistance programme based on cash transfers starting at 350 Egyptian liras (€18.24) per month. However, the payment of this sum remains conditional on the children in the household attending school. All families whose children are married before the age of 18 are excluded.
This brings the number of beneficiaries of the Solidarity and Dignity Program, launched in 2015 thanks to World Bank funds, to more than twenty million in a country with a population of around 103 million.
The Egyptian presidency also announces that, in parallel, nine million needy families will receive further assistance within six months. This will cost the country's budget 1 billion Egyptian pounds (€52.12m) per month.

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