Egypt. 2 years after the loan agreement: What the IMF failed to anticipate | MadaMasr
On November 11, 2016, the International Monetary Fund (IMF) and the Egyptian government finalized a US$12 billion loan agreement tied to an economic reform plan that included a series of austerity measures and the liberalization of the Egyptian pound.
At the time, Egypt was facing a shortage in foreign currency reserves, and both the IMF and the Egyptian authorities made optimistic forecasts about the future of the Egyptian economy under the new economic program.
Two years later, the crisis in foreign currency reserves has largely been alleviated and the IMF’s growth targets appear to be on track. Yet those achievements have been offset by soaring rates of inflation and foreign debt, along with the plummeting purchasing power of the local currency. Meanwhile, fuel subsidies, which were meant to be reduced to alleviate the government budget — a specific goal of the economic program — have instead increased as a result of the devaluation of the pound.
A number of these unanticipated challenges now facing the Egyptian economy are highlighted in a new report by the investment bank Shuaa Capital, which was issued to its clients several days ago and of which Mada Masr has obtained a copy.