The agreement between Egypt and the IMF “seems to lay the groundwork for success,” Mohamed El-Erian, former CEO and co-Chief Investment Officer of PIMCO and member of the CBE’s coordination council, writes for Project Syndicate. Past experience, El-Erian notes, shows that success of IMF programmes depend on six key factors:

• A carefully designed economic program that is locally owned and accounts for a country’s economic realities.

• A focus on addressing social challenges that may arise – in particular, protecting the most vulnerable segments of the population.
• A strong and sustained political commitment to ensuring the program’s proper implementation.
• Sufficient and timely external financing.
• Transparent and timely communication, not only between the IMF and national officials, but also with other stakeholders, particularly citizens.
• Trust, so that if (or, rather, when) things do not go according to plan, the relevant parties can work together effectively to make the needed adjustments.

He says “the primary objective of the three-year program will be to unleash Egypt’s considerable potential, enhance growth and job creation, and tackle foreign-exchange shortages.” El-Erian believes the agreement carries a lot of good news: ”Egyptian and IMF officials are said to have placed substantial emphasis on a set of pro-growth reforms aimed at improving sectors of Egypt’s economy with significant untapped potential… the agreement is understood to include fiscal, monetary, and exchange-rate measures aimed at containing financial imbalances and ensuring the program’s medium-term viability. And, importantly, it promotes the strengthening of social-welfare programs and safety nets – features that can do much to revive the IMF’s reputation in Egypt and bolster trust among stakeholders.” The challenge now, he says, is guaranteeing careful implementation of the programme, comprehensive communication, and consistent efforts to reinforce trust between Egypt and the Fund. “It seems that Egypt and the IMF have the potential to overcome their legacy of testy relations,” El-Erian hopes.