The IMF has lowered its 2017 consumer price inflation forecast for Egypt to 17.3%, according to its October 2016 Middle East and Central Asia Regional Economic Outlook report (pdf), revising downward the projected 18.2% rate in the October 2016 World Economic Outlook, which came out earlier this month. Now for the bad news: The IMF now projects consumer prices will rise 14% this year, up from 10.2% in its World Economic Outlook report. Egypt will see the most inflationary conditions in the region next year, the institution says, skewing the regional average to 9.8%. The region, and Egypt in particular, will face additional upward pressure from rising global energy prices, further electricity and water subsidy phase-outs, and increased domestic demand from increased large-scale public and private investment, the UMF says.

The IMF maintained Egypt’s projected growth outlook of 3.8% this year and 4.0% for next year. While the report criticized the slowness with which we’re cutting subsidies at a time when energy prices are expected to rise, the report takes a positive view on Egypt’s move towards fiscal reform through reforming the tax code and implementing the VAT. The IMF also noted that it is committing USD 20 bn to MENA oil importing countries to support these reforms, and guess which country made the list?

Also yesterday: A senior IMF official downplayed the risk of runaway inflation post-devaluation, suggesting the current parallel-market value of the USD is already priced-in. “If you look at what’s happening to prices today, already many prices are reflecting the parallel market rate,” Massood Ahmed, head of the IMF’s Middle East and Central Asia department, told Bloomberg. “It’s not obvious to me there is going to be a big additional impact on prices.” Ahmed, who is due to retire this month, “said he hopes the IMF’s Executive Board would be able to consider the loan request later this month or in November. He said there was ‘no deadline’ for Egypt to implement the reforms. ‘But the more important point is that delays on important areas they’re trying to address, such as the problem they have in the foreign-exchange market, would have a high cost on the economy,’ he said. As part of the initial loan agreement, Egyptian officials also agreed to move to a flexible exchange-rate system.”

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