Masood Ahmed, director of the International Monetary Fund (IMF) Middle East and Central Asia Department, said Egypt has achieved greater stability and confidence in its economy, where it has made great efforts over 2014/2015 to reduce the balance of payments deficit.
Ahmed expressed his approval of the Central Bank of Egypt (CBE) move to introduce more flexibility in the Egyptian pound’s exchange rate.
Ahmed told Daily News Egypt that the growth forecast for Egypt this year ranges between 3-3.5%, down from 4.2% last year, which is mainly due to the decline in tourism revenues after the Russian plane crash, as well as the foreign currency crisis.
Making the market more flexible is more effective than a fair US dollar price, said Ahmed, adding that the first would reflect the real rate of the pound through supply and demand operations. Ahmed said that major national projects can help accelerate growth and create jobs.
Egypt did not make a formal request to the IMF for a loan, said Ahmed, pointing out that the support provided to Egypt now is limited to technical assistance. He added financing from the Gulf proved to be sufficient to help Egypt in the last period.
Ahmed named the main challenges facing Egypt as the high budget deficit, providing job opportunities, and creating a suitable environment for investment. He, however, said the country is moving in the right direction.
Economic reforms must be continued, regardless of the funding source, said Ahmed, explaining that Egypt requires $12bn per year. Ahmed also called for a better business environment to welcome private investment, in light of the limited work provided through the public sector.
“Egypt’s access to financing from the fund will be a catalyst to get funds from other sources,” Ahmed said.
Ahmed called upon the government to angle public spending towards infrastructure, so as to create opportunities for growth and jobs.
In a different context, Ahmed said the IMF reached an agreement with Tunisia that includes a loan programme of $2.8bn over four years.
Ahmed said oil-importing countries should take serious steps to address exchange rates and conduct structural reforms.
During a press conference held by the IMF in Washington, DC during the 2016 Spring Meetings, Ahmed said Iran’s growth forecast stand at 4%, in light of lifting the economic sanctions and increased oil production, registering 600,000 barrels per day.
Ahmed added that oil production rates in Iraq are witnessing an increase this year. As for the GCC states, he noted that their expected growth rates for 2016 will decline to lower than 2%, dropping from the regular rate of 3.7% in the past, due to public spending austerity and the decline in oil prices.
Oil exports declined by $93bn in oil-exporting countries, which is expected to continue in 2016, indicating that this will affect the balance of payments and the general budget, said Ahmed.
Despite these expectations, he pointed out that most of the oil exporting countries still have accumulated reserves and the capability to borrow to rectify their positions.
As for oil-importing countries, he pointed out that the IMF monitored the recovery of economic growth indicators, after years of stagnation. However, he described it as a fragile and uneven recovery.
Ahmed pointed out that the growth rate projections for these countries increased from lower than 3% in 2011 to just under 4% in the current year, while the same rate is expected next year, influenced by low oil prices.
The lack of security and stability, the continuation of conflicts in many of these countries, the interdependence of some of these countries with the GCC in tourism, and oil sectors as well as the remittance from residents in these countries are the reasons behind the fragile recovery, said Ahmed, using the examples of Lebanon and Pakistan in the decline of remittances.
Ahmed believes these countries must rationalise the general budget, and add flexibility to exchange prices, as they have gone through a hard period. He called on them to begin reforms that enhance competiveness and inclusive growth, and create an infrastructure that offers various jobs.
In terms of the refugee crisis and its impact on the economies of countries receiving them, Ahmed stressed that the international community must offer them aid with conditions these countries can bear, either through grants or facilitated loans.
The geopolitical dangers in the region had an impact on growth expectations, not only in the region but also on the world, said Ahmed. These conflicts have caused the Syrian economy to decline to half its previous state. In Yemen, the economy fell to a third of its previous state. However, these numbers do not reflect the real story, which is represented in millions of humans who fled from Syria, and others who were also impacted the same way in Yemen.
Ahmed said wars have contributed to damaging the infrastructure that took years to build in Syria. Tens of billions of dollars will be needed in order to rebuild it.
The impact of the events in Syria, Yemen, Iraq, and Libya on the economies of the region will continue for years, said Ahmed.