Last month, an IMF mission visited Egypt for an Article IV consultation (a visit by an IMF team to assess the country’s economic and financial developments and discuss its economic and financial policies). In its press release, the Fund acknowledged Egypt’s economic recovery (projecting a 3.8% growth in fiscal year 2014/15) and a growing national consensus on the need for economic reforms.
While recognising that the authorities have begun to take the necessary action, it also warned that additional external financing will still be required through the medium term and that megaprojects should be carefully designed and monitored to limit fiscal risks.
Impact on country risk
Over the past years, different IMF missions have visited Egypt, but no Article IV consultation (or IMF program) had been concluded since March 2010.
While the final Article IV report itself should still be presented to the IMF’s Executive Board, the mission can be seen as a step in the direction of increasing international financial cooperation, despite continuing controversies around human rights, democratic representation and justice, including the dismissal of murder charges against former President Mubarak last weekend.
The mission is also likely to precede an IMF programme if Egypt can take the measures to render its fiscal and external situation more sustainable and reduce its high dependency on financial support from friendly GCC countries.
While this support somewhat eases the short-term pressure for an IMF loan and programme, such a programme would be a major step forward towards financial and economic stability. It is not only expected to free additional official funding, but also to support investor confidence and attract private investments and financing.
Credendo Group , Daan Rowies