Egypt's tourism revenues will rebound to $16.7bn, $17.7bn by end of the current FY2018/19 and continue into FY2019/20, the International Monetary Fund (IMF) revealed over its fifth review staff report on the Egyptian economy on Friday, compared to the Central Bank of Egypt (CBE)'s estimation of $12.57bn for FY2018/19. The programme's performance has remained broadly favourable, but progress on structural reforms have been uneven, the report mentioned. The report also included updated estimations of the main economic indicators. The gross domestic product's (GDP) growth is expected to reach 5.9% in FY2019/20 and 6% in FY2020/21, supported by production of natural gas and the ongoing recovery of tourism as security conditions stabilise, added the report. The IMF amended its positive expectations to the Egyptian exports reaching 34.1% in FY2019/20, compared to $29.6bn in FY2018/19, and $35.9bn in FY2020/21, added the report. Exports outside the oil and gas sector have strengthened modestly following its depreciation in 2016, but remain low compared to other emerging market peers at around 6% of GDP. To utilize Egypt's full potential, it is critical to improve the efficiency of resource allocation by strengthening competition, improving governance, limiting the scope for corruption, and reducing the role of the state, the report mentioned. IMF lowered its expectations to foreign direct investments (FDIs) to reach $8.1bn in FY2019/20 compared to $11.2bn before the fifth review, while is expects FDIs to recover to $9.8bn in FY2020/21. The IMF will conduct the next Article IV consultations with Egypt in early 2020. The IMF technically supports a medium-term revenue strategy (MTRS) in Egypt to strengthen revenue mobilization and create space to increase social spending. MTRS is key to strengthening social protection, which has been a priority since the start of the reform programme, the report explained, adding that improving revenue mobilisation is essential to further increasing space for critical spending in health, education, and infrastructure and to continue building a modern and efficient social safety net. MTRS is a government-led initiative supported by the IMF technical assistance and covers both tax policy and tax administration, expected to be published by end-2019. Moreover, gross debts of GDP will decrease to 81.9% of the GDP in FY2019/20 from 85.2% in the past FY2018/19. It will continue this negative trend to 79.2% in FY2022/21, the report stated. The external debts will increase to $106.1bn in FY2019/20, compared to $103.1bn in FY2018/19 and $109.7bn in FY2020/21, the report asserted, noting that the Egyptian authorities are required to repay $18.5bn, $15.9bn, $18.2bn in FY2019/20, FY2020/21, FY2021/22 in arespectively, in debts service to its lenders. The gross financing requirements are at $29.7bn, $28.2bn, $32bn in FY2019/20, FY2020/21 and FY2021/22 respectively, said the report, noting that the authorities also plan to increase issuance of longer-term debt instruments to extend the duration and improve the maturity profile of public debt. The authorities are also preparing a pension reform based on a recent actuarial assessment of the current system to ensure its financial viability, including an overhaul of the organizational structure of public pension funds to provide more effective administration and investment of their assets, noted the report. Banking Law draft to be discussed in parliament in October The CBE intends to gradually move to an interest rate-based monetary policy framework anchored to inflation in the medium term, said the report, noting that the draft Banking Law that will be discussed in Parliament in October defines price stability as the primary objective of monetary policy and strengthens the CBE's governance, financial structure, operational and institutional autonomy, and the early intervention and resolution framework. EGPC to clear remaining outstanding arrears by 2019-end The completion of the fuel subsidy reform is a significant achievement and will help safeguard fiscal space for high priority social spending, said the report, noting that this step will encourage energy efficiency, attract investment in more labour-intensive industries, and free up fiscal space for high-priority expenditures, including targeted cash transfers to poor households. The automatic fuel price indexation mechanism is critical to safeguard the budget against the re-emergence of subsidies from future changes in fuel prices, and to signal the continued commitment to fiscal discipline needed to reduce public debt, said the report. The authorities are implementing a plan to strengthen corporate governance and optimise operating costs of the Egyptian General Petroleum Corporation (EGPC), noting that EGPC is committed to clearing tis remaining outstanding arrears by end December 2019. EGPC further cleared $150m of its outstanding arrears by end June 2019, which amounted to $1.043bn by the end of December 2018, mentioned the report. On July 24, 2019, the IMF's executive board completed the fifth and final review of Egypt's economic reform programme supported by an arrangement under the Extended Fund Facility (EFF). The completion of the review allowed the authorities to draw about $2bn, bringing total disbursements to about $11.9 bn which is the full amount approved by the executive board on November 11, 2016.
