The International Monetary Fund said it is working with Egypt to help bring inflation under control, as the government moves ahead with an economic reform programme that boosted investment but also sent prices soaring.
The IMF recognises “the sacrifices made and the difficulties faced by many Egyptian citizens,” managing director Christine Lagarde said in a statement following a meeting on Wednesday with President Abdel-Fattah El-Sisi in Washington. “The IMF is working to help the government and the central bank bring inflation under control and supports the steps the Egyptian authorities are taking to protect its poorest and most vulnerable citizens.”
Egypt lifted foreign exchange restrictions in November to curb a crippling foreign currency shortage, a move that drew overseas investors and secured a $12bn IMF loan. Yet while net foreign reserves and foreign holdings of Egyptian debt have been rising, the flotation of the pound and an accompanying increase in subsidised fuel prices have hammered consumers in the nation of 92mn, about half of whom live near or below the poverty line.
Annual core inflation surged past 30% in February, although the increase in the month-on-month rate eased. Officials say they are committed to mitigating the impact of the reforms on the country’s poorest, in part by ensuring sufficient supplies of subsidised goods and battling what they maintain is price gouging by traders.
El-Sisi said Egypt is committed to pushing ahead with the reform programme and cooperating with the IMF, according to a statement from the presidency released after his meeting with Lagarde. At the same time, he noted the “patience” the Egyptian people have displayed despite the hardship the economic measures have caused.
Egyptian officials are expected to enact further subsidy cuts in the coming months as they look to rein in one of the Middle East’s highest budget deficits. The government is targeting a budget gap of 9.1% of gross domestic product in the next fiscal year that begins in July, while growth is targeted at 4.6%.
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