Egypt has recently received an $8 billion financial support program from the International Monetary Fund (IMF), which was approved four weeks ago. The report issued by the IMF on Egypt’s commitment to addressing the government’s reliance on overdraft facilities from the central bank and off-budget public sector activities highlights several weaknesses in the country’s economy.
The Egyptian government has taken steps to tighten monetary policy, implement a flexible exchange rate system, and raise gasoline and fuel prices since December 2022. However, a return to a fixed exchange rate in February 2023 had negative consequences for the economy, as noted in the report. This is due to issues such as a shortage of foreign exchange, high inflation, and restricted imports due to the fixed exchange rate.
The report also pointed out that delayed interest rate increases and excessive investment in national projects had contributed to inflation and exchange rate problems. Additionally, significant lending by the central bank to government bodies outside of the Ministry of Finance has been scrutinized, contributing to inflationary pressures.
Egypt’s commitment to limiting government overdrafts and preventing further lending from the central bank to government bodies was emphasized in the report. The Central Bank has lent a substantial amount to government bodies outside of the Ministry of Finance, leading to inflationary pressures. However, Egypt is making progress towards stabilizing its economy by taking measures such as adjusting monetary policy and addressing lending practices and investment decisions.
In conclusion, Egypt is working hard to address its economic challenges through various measures aimed at stabilizing its economy for sustainable growth.