Egypt needs to “overhaul” its business environment for the latest IMF program to succeed: That’s the conclusion of the Institute of International Finance (IIF), which published a report last month following a visit to Cairo to talk with policymakers and representatives of financial institutions, including the IMF.

The good: “Egypt’s challenges are not insurmountable.” The reform program has the capacity to transform the country into a more open, market-based economy with the private sector at its heart. The terms agreed with the IMF go deeper than ever before, for the first time containing commitments to level the playing field between the state and the private sector, and reduce the economic footprint of state- and military-owned companies. Implementing these reforms — via the state ownership policy, the plan to sell stakes in 32 state-owned companies and efforts to improve transparency — will be “critical” to the success of the program, the IIF says.

But it’s not without uncertainty: “The success of the program hinges on regaining investor confidence, strong determination to stay the course in the face of challenges, resistance to vested interest groups, and rapidly adopting to potential headwinds.” There is also uncertainty about the amount that the government will be able to raise via asset sales — and thus the program’s impact on Egypt’s estimated USD 17 bn external funding gap. Then there are the political challenges of divesting state-owned assets, which the IIF says could be “overwhelming.”

The big questions outside of privatization:

• Do we stick to a flexible exchange-rate regime?
• Where will the government drum up higher tax revenue — without choking companies that are already participating in the tax system?
• Can we massively ramp up exports of goods and services as a percentage of GDP, where we (at less than 20%) lag far behind Thailand, Morocco, and Turkey (35-70%)?
• How do policymakers respond to and readjust policies in the face of future economic headwinds?

And the big one: “Unless deep reforms, focused specifically on the overhaul of the business environment, are implemented, it is difficult to see how the objectives of the authorities’ program can be met,” the IIF said.