{"id":574251,"date":"2020-09-03T03:48:14","date_gmt":"2020-09-03T03:48:14","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2020\/09\/03\/imf-releases-report-card-on-pandemic-aid-to-egypt\/"},"modified":"2020-09-03T03:48:14","modified_gmt":"2020-09-03T03:48:14","slug":"imf-releases-report-card-on-pandemic-aid-to-egypt","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2020\/09\/03\/imf-releases-report-card-on-pandemic-aid-to-egypt\/","title":{"rendered":"IMF releases report card on pandemic aid to Egypt"},"content":{"rendered":"

<\/a> The IMF heaped praise on Egypt\u2019s response to covid-19 in a staff report<\/strong> on the recently-approved one-year USD 2.8 bn rapid financing instrument Cairo received to help \u201ctargeted and temporary\u201d spending. \u201cThe Government of Egypt has responded to the crisis with a comprehensive package aimed at tackling the health emergency and supporting economic activity. The authorities acted swiftly to allocate resources to the health sector, provide targeted support to the most severely impacted sectors, and expand social safety net programs to protect the most vulnerable,\u201d the fund said. This includes the government\u2019s EGP 100 bn stimulus package<\/a>, which amounted to 1.8% of GDP, and includes increased health and social spending. The loan, which was approved in May<\/a>, was followed by a separate USD 5.2 bn standby agreement<\/a> to help plug a balance of payments shortfall.<\/p>\n

The fund also liked the CBE\u2019s interest rate cut <\/strong>in March<\/a><\/strong>, but is suggesting rates be left on <\/strong>hold <\/strong>until the impact of the historic 300 bps cut becomes clearer. Further easing needs to consider how a lower interest rate could create capital flight, drive up inflation, or create pressure on the EGP, the fund said.<\/p>\n

Continued exchange rate flexibility will be a \u201ccrucial shock absorber,\u201d<\/strong> it added.<\/p>\n

But challenges remain: <\/strong>The fund\u2019s analysis of how covid-19 affected Egypt was largely unchanged from what it said in a staff appraisal in August<\/a> on approving the larger standby facility. \u201cGrowth [is also] projected to sharply slow during 2019\/20 and 2020\/21 as a result of a halt in tourism, reduced remittances, and a slowdown in domestic activity,\u201d it said yesterday. Lack of clarity on when the pandemic will end is obviously a challenge, the fund noted.<\/p>\n

A longer recovery period could mean <\/strong>more \u201cunemployment, larger public debt, lower growth, rising poverty and inequality, asset quality erosion in the banking sector, and social pressures.\u201d<\/p>\n

The fund thinks GDP growth will rebound to pre-pandemic levels of 5.5% in the medium term<\/strong>, the fund forecasts, after having revised downward its projections for the current fiscal year. Average inflation will accelerate to 9% this fiscal year<\/strong>, up from 6% in FY2019-2020, before falling back to 7.2% the year after, according to IMF projections. Unemployment, meanwhile, is also expected to rise especially due to the shutdown of the tourism sector, but the fund offered no hard figures.<\/p>\n

Other key indicators:<\/strong><\/p>\n