The IMF lowers its forecast for the growth of the Egyptian economy, and experts explain the reasons

The IMF lowers its forecast for the growth of the Egyptian economy, and experts explain the reasons

Dubai, United Arab Emirates (CNN)–The International Monetary Fund maintained its forecast for the growth of the Egyptian economy at 5.9% during the last fiscal year, but lowered its growth forecast for the current fiscal year by 0.2% to 4.8%. This is what experts attributed to the negative repercussions faced by the Egyptian economy as a result of the Russian war in Ukraine, which affected the increase in commodity prices and the reduction of the dollar supply. However, they pointed out that the IMF’s assessment of Egypt’s last loan in 2020 may bring negotiations close to obtaining a new loan.

In its Economic Outlook, the IMF lowered its forecast for global economic growth in 2022 for the third time to 3.2%, compared to 3.6% it had expected in April. It also lowered its forecast for global economic growth in 2023 to 2.9%, compared to 3.6% it had forecast in April, according to IMF data.

Economist Hani Genena said that the growth factors of the Egyptian economy are facing increasing pressure as a result of the war in Ukraine, starting with the government, which is preparing to reduce expenditures in order to reduce the budget deficit, within the framework of the requirements for obtaining a new loan from the IMF.

Genena pointed to the decrease in the purchasing power of citizens as a result of high inflation, a decline in tourism revenues as a result of the war, and expectations of a similar impact on exports in light of the IMF’s expectations of a global recession, especially the European Union countries, which are an important trading partner for Egypt.

Egypt is negotiating to obtain a new loan from the International Monetary Fund under the Extended Fund Facility Mechanism with the aim of providing support to the Egyptian state to support its comprehensive national economic reform plans, and a delegation from the Fund visited Egypt during the past weeks to hold consultations and technical discussions on this matter, according to a government statement.

Geneina added, in exclusive statements to CNN in Arabic, that Egypt was moving towards achieving an economic growth rate of more than 5.5% during the current year, had it not been for the continuation of the Russian-Ukrainian war crisis, which negatively affected the rise in commodity prices and a shortage in the dollar supply. Domestically, in addition to the negative impact on growth factors, which is expected to lead to a slowdown in economic growth in Egypt.

This comes at a time when Egypt’s foreign exchange reserves continued to decline for the third month in a row, reaching $33.4 billion at the end of June from $35.5 billion at the end of May, according to central bank data.

Regarding the IMF’s warning to Egypt of the high debt burden, the economist put forward two solutions to meet this challenge in the short term, the first being the speed of borrowing from the IMF, which opens the prospects for financing from other parties, which see the Fund’s loan as a certificate of confidence for Egypt, and secondly, austerity in expenditures, whether the government Or individuals to reduce imports, he also proposed a long-term solution, which is to increase the competitiveness of the Egyptian economy and encourage attracting more foreign investment.

Hani Geneina believes that what the International Monetary Fund has dealt with on Egypt is positive and supports the possibility of it obtaining new financing from the Fund, especially since the Fund praised Egypt’s success in implementing all requirements for obtaining a loan of $5.2 billion in 2020, and this is the second success certificate from the Fund. After the loan I got in 2016.

The International Monetary Fund’s assessment of the credit readiness program that Egypt obtained at a value of $5.2 billion during the Corona pandemic in 2020, praised its success in achieving most of the goals of the program, and warned of the high debt burden and large financing needs, according to what was reported by the media.

For his part, Hani Aboul Fotouh, a banking expert, said in exclusive statements to CNN in Arabic, that the IMF lowered its expectations for the growth of the Egyptian economy, and called for giving more space to the private sector, improving governance and implementing more structural and financial reforms to enhance competitiveness, adding that the Egyptian economy faces the same challenges. And the expectations faced by the global economy as a result of the Russian-Ukrainian war.

Aboul Fotouh pointed out that there is a fundamental defect in the Egyptian economy that made it more vulnerable to external shocks, as mentioned by the IMF, as Egypt relied on indirect foreign investments during the past years, and its gradual exit in the wake of the Ukrainian war amounted to 20 billion dollars, which negatively affected the supply The dollar, which requires that Egypt rely on more sustainable resources in implementing its national projects and use financial resources in foreign currency to implement projects that generate returns, achieve development and raise growth rates.

The banking expert stressed the need for Egypt to increase its revenues from its dollar resources, whether through exports, the Suez Canal, remittances from workers abroad, or foreign direct investment, which requires the Ministerial Economic Group to provide solutions to maximize resources from these sources, while implementing a government austerity plan to reduce the budget deficit. In addition to rationalizing imports.

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