IMF praises subsidy reforms, calls for more monetary tightening in third review: Egypt has passed the IMF’s third review of the economic reform agenda with flying colors. The institution singled out recent fuel subsidy cuts for particular praise: “The continued fuel subsidy reform contributes to reducing the budget deficit and makes available more resources for social programs to support the most vulnerable,” the IMF said in a statement yesterday. The IMF said Egypt’s reform program has helped accelerate growth, cut inflation and unemployment, and narrow external and fiscal deficits. The positive review will unlock the next USD 2 bn disbursement of the USD 12 bn extended fund facility. Egypt expects to receive the transder this week, Finance Minister Mohamed Maait said over the weekend.

The IMF warned that the CBE needs to continue tightening monetary policy in the wake of the latest subsidy cuts. “The Central Bank of Egypt should maintain its restrictive stance to contain second‑round effects of fuel and electricity price increases, with future policy changes guided by inflation expectations and demand pressures,” IMF First Deputy Managing Director and Acting Chair David Lipton said yesterday.

Global Emerging Markets Zombie Apocalypse is the biggest threat to Egypt’s reform drive, IMF says: Remember the days when domestic foot-dragging was the biggest problem we faced? No more: Political risk has been supplanted by the turbulent global economy as the biggest risk to the continued implementations of reforms, the IMF says. It sees outflows of global capital from emerging markets as particularly concerning. The good news is that Egypt is well equipped to adapt. “The healthy level of foreign reserves and flexible exchange rate leaves Egypt well positioned to manage any acceleration in outflows, but this reinforces the importance of a sound macroeconomic framework and consistent policy implementation,” said Lipton.

The IMF now sees Egypt’s economy growing at a 5.5% clip by the end of FY2018-19, up from a projected 5.2% in FY2017-18. The IMF also expects inflation to reach 13.1% by the end of the fiscal year, and average out at 14.4%.