IMF cozies up to Egypt amid economic reform

The International Monetary Fund may soon take a thorough look at Egypt’s economy for the first time since its revolution in 2011, potentially paving the way for greater cooperation on President Abdel Fattah Al Sisi’s reform agenda and renewing talks about long-delayed IMF financing.

The IMF is already talking with Egyptian officials about its economic outlook and value-added tax policy, the fund’s Managing Director Christine Lagarde said in a recent interview with Asharq Al-Awsat.

Egypt’s government prepared a draft law to overhaul its tax system early this year in order to bring in badly needed revenues, but it has yet to be put into place.

The IMF also hopes to resume more important comprehensive annual reviews of Egypt’s economy “in the foreseeable future,” Ms. Lagarde said.

The IMF suspended the reviews – a cornerstone of its policy consultations with member states – in 2011 when a revolution unseated president Hosni Mubarak. While continuous political upheaval has prevented a resumption since then, the election last year of Mr. Sisi, a former army chief, may lay the foundations for closer economic surveillance by the IMF.

Mr. Sisi has already put in place economic reforms the IMF and other advisors have long argued for by rolling back fuel subsidies, raising prices for petrol and natural gas by over 70%. This was a major political risk because it dramatically increased living costs for the poor, but the changes went into effect without causing serious unrest.

Lifting subsidies was “a good start toward restoring fiscal sustainability,” Ms. Lagarde said, though the poor needed to be protected.