Economic reforms will be necessary for Egypt to see renewed growth and investment, IMF chief Christine Lagarde said Thursday.
In an interview with CNN’s Christiane Amanpour, Lagarde addressed concerns that there had been a “rupture” between the global lender and the Egyptian government, and described what she sees ahead for Egypt’s economy.
“Well, first of all, the relationship with Egypt is not broken,” said Lagarde. “We do have a relationship, we do provide technical assistance at the moment – concerning VAT, [and] energy subsidy reform – and we shall continue to be available as needed, when the Egyptian authorities ask us to help.”
The IMF chief did acknowledge progress, citing action taken on energy subsidy reform as “encouraging”.
However, Lagarde stressed the need for the next president and parliament to ensure that such reforms continue. “I think no matter who is in charge, economic reforms will be a must,” she said. “And if that is done thoroughly, decisively, I’m sure there will be growth and investment. But the reform stage is certainly a condition to that.”
Egypt’s negotiations with the IMF over a $4.8bn loan have been a long road. Talks began in 2011 in response to falling foreign reserves and a faltering economy in the wake of the 25 January Revolution. Since then, the talks have seen multiple stops and starts, with previous governments having baulked at implementing the fund’s demanded subsidy reforms amid strong popular opposition.
In April 2013, protests erupted during the IMF’s visit to Egypt, “whereby a broad array of social movements, trade unions, and political parties demonstrated against the IMF’s proposed subsidy reform policies,” with similar protests held in November 2011, the report notes. In December 2012, attempts by former president Mohamed Morsi to implement subsidy cuts “were reversed in the face of popular opposition” only days after their announcement.
In March, the Egyptian Center for Economic and Social Rights (ECESR) released a report saying the fund’s strategies in the Middle East have fallen short of properly engaging the challenges to the region, citing a lack of proper research infrastructure to better target subsidies as a primary impediment. Cutting subsidies before targeting can be improved, the report said, would disproportionately hurt the poor and middle class.