IMF: Egypt's Objective is to Maintain Flexible Exchange Rate, Address Inflation

Jihad Azour, Director of the Middle East and Central Asia at the International Monetary Fund  said that it is important to maintain the flexibility of the exchange rate in Egypt and address inflation.

Azour explained that the second and third goals are to reduce the high inflation rate and raise the level of social protection, while the fourth goal is to create job opportunities, and the role of the private sector is considered essential in this aspect.

On the other hand, Azour said, in an interview with “Al Arabiya Business” during the spring meetings of the International Monetary Fund and the World Bank Group in Washington, that it is important in the next stage in Egypt to strengthen the measures that were recommended by the Fund in the first review with the aim of achieving stability and creating job opportunities. .

He explained that the first review of Egypt's program stressed the importance of expanding the private sector's ability to grow.

He continued: "The second review of the Egyptian program will focus on a greater role for the private sector and re-engineering the public sector."

However, he indicated in his report on the regional economic prospects for the Middle East and Central Asia that although the Egyptian authorities tightened monetary policy earlier this year to reduce inflation, there may be a need for further tightening measures.

The Fund said that the scarcity of foreign exchange in Egypt hampered economic activity until Egypt recently made necessary adjustments to its macroeconomic policy, referring to the Central Bank’s decisions on March 6 to liberalize the exchange rate and raise key interest rates by 600 basis points.

But the Fund stated that the situation in the Red Sea is expected to continue to affect activity in Egypt in the remainder of the fiscal year. He added that, as a result, he revised Egypt's economic growth forecast downward by 0.6% compared to his estimates issued in October to 3% growth in 2024.

In the World Economic Outlook report issued earlier, the Fund expected Egypt’s economy to grow by 4.4% in the fiscal year 2024/25.

Core inflation in Egypt, which excludes volatile commodity prices, was 33.7% last March, down from 35.1% in February. At the same time, the annual rate of inflation in Egyptian cities reached 33.3% in March, compared to 35.7% in February.

The Fund stated that the $35 billion investment deal concluded by Egypt with ADQ Holding Company in Abu Dhabi will contribute to alleviating the financial pressures facing the country in the near term and reduce dependence on the local financial system.