The IMF expects Egypt’s economy to “rebound strongly” in FY2021-2022, with GDP coming in at 5.2%, according to a statement last night in which the institution praised Egypt’s covid-19 policies (and gave itself a pat on the back for the assist). “As a result of the government’s swift and prudent policy response, coupled with IMF support, the Egyptian economy showed resilience in the face of the pandemic,” the statement notes.

What the IMF likes: “Over the past 12 months, the authorities’ commitment to prudent policies and their strong performance under the IMF program have helped mitigate the health and social impact of the pandemic while safeguarding economic stability, debt sustainability, and investor confidence,” the statement reads.

What were these prudent policies?

• The economic reform program provided us with a good buffer to withstand the shock of covid;
• Fiscal support included relief for businesses and workers in the hardest-hit sectors, including tourism and manufacturing;
• The postponement of tax payments and the expansion of cash transfer programs to poor households and irregular workers;
• The central bank cut interest rates by 400 bps in 2020;
• The CBE increased access to credit at preferential interest rates and imposed a six-month break on payments for borrowers.

A warning: “But the outlook is still clouded by uncertainty related to the pandemic, including regarding the full recovery of tourism,” the statement notes. The IMF also pointed to “Egypt’s high public debt and large gross financing needs,” saying that this will leave it vulnerable to external shocks, such as higher costs of borrowing at the global level as developed economies gradually withdraw their economic stimulus.

Recommendations: It called on policymakers to make reducing public debt a priority and institute policies that will further drive private sector growth.