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The International Monetary Fund said Thursday that Egypt should press ahead with economic reforms needed for a $12 billion loan.
The government of President Abdel Fattah al-Sisi is rolling out an austerity program and seeking billions in financial support from other countries to meet conditions necessary for the IMF’s loan programme.
“We think that the reforms that the government is undertaking are headed in the right direction,” IMF spokesman Gerry Rice told reporters in Washington.
“That doesn’t mean they’re easy to do. They’re difficult. There’s going to be disagreement and differences and maybe even protests.”
Loans from Saudi Arabia and China will help Egypt gather the $5-$6 billion in additional financing required to complement the IMF lending, according to Rice.
Given that “good progress” toward securing the bilateral funds, the IMF program could come before the Fund’s board of directors for approval “in the next few weeks,” he said.
Rice said Cairo had adopted a new budget, approved a value-added tax, and developed a plan on energy subsidies, and that the central bank planned a gradual move toward a more flexible exchange rate.
He stressed however that the IMF’s planned $12 billion loan programme did not call for cuts to food subsidies. Egyptian consumers have faced stinging shortages in rice, sugar, cooking oil and baby formula.
“A lot of the protest seems to be aimed at the issue of food subsidies, and I just want to make clear that the IMF program does not call for any cuts in food subsidies,” said Rice.
“In fact, it provides for increases in the food subsidy budget to help people get through the early months of adjustment. Of course, it’s up to the Egyptian government to decide which subsidies will be increased.”
Rice said that the IMF program would make social protection a “cornerstone,” moving budgetary savings to areas that would cushion the poor and vulnerable from expected effects of government reforms.
