IMF’s Lagarde: Egyptian economy showing 'strong' signs of recovery

'Country's economic growth is among the highest in the Middle East,' says the managing director

Tourists gather outside the temple of Abu Simbel, south of Aswan in upper Egypt, to witness the sun illuminate the inner sanctuary. Egypt's economy is recovering thanks to a currency float, economic rShow more

Egypt's economy is recovering after measures to ease inflation and float the currency under a three-year reform plan, the International Monetary Fund said.

The IMF's managing director Christine Lagarde underscored the importance of  the country's structural reforms to achieve more sustainable growth. "Egypt’s economy is showing strong signs of recovery, and its economic growth is among the highest in the Middle East," she said.

The comments came after Ms Lagarde's meeting with Egyptian President Abdel Fattah El Sisi in New York on Sunday. Egypt, North Africa's largest economy, is implementing an economic reform programme backed by a $12 billion (Dh44bn) loan from the IMF since late 2016. Under the programme, the country made deep cuts to energy subsidies, introduced new taxes and floated the currency with the intention to overhaul the economy, boost investor confidence and restore stability to capital markets.

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Inflation has eased after rising to more than 34 per cent following the November 2016 decision to depreciate the Egyptian pound.

Monthly inflation in August decreased to 1.8 per cent from 2.4 per cent in July, according to Capmas, the state-run statistics agency. It was its slowest pace since the government began enacting another round of subsidy cuts and interest rate hikes.

Annual inflation rate accelerated to 14.2 per cent compared to 13.5 per cent in July - near the central bank’s target range of about 13 per cent.

The float and accompanying reforms have helped revive the economy and boost investor confidence.

In August, Moody's Investors Service raised Egypt's credit outlook from stable to positive, citing progress in implementing the IMF-backed programme to bolster economic growth. The country's long-term rating remained at B3, six levels below investment grade.

A recovery in Egypt's vital tourism industry and increase in remittances from Egyptians working abroad, combined with the currency float and economic reforms, have prompted S&P Global Ratings to raise the country's credit rating. In May, the agency upgraded long-term rating by one notch to B, or five levels below investment grade, citing improving economic growth.

Ms Lagarde said she agreed with President El Sisi on the "importance of capitalising on Egypt’s macroeconomic gains to advance the authorities’ home-grown structural reforms."

"These reforms will help achieve more sustainable, inclusive and private-sector led growth which will help create jobs for Egypt’s young population, while also ensuring adequate resources are available for social protection," Ms Lagarde said.