“The IMF team and the Egyptian authorities have reached a staff-level agreement on the first revision of Egypt`s economic programme, supported by the IMF`s $5.2 billion preparation agreement (press release). The agreement is subject to IMF Board approval in the coming weeks. After authorization, an additional SDR 1.16 billion (approximately $1.6 billion) will be made available to Egypt. Read more about key questions about the IMF`s agreement with Egypt CAIRO, Nov 19 (Reuters) – The International Monetary Fund (IMF) said on Thursday it had secured a staff-level agreement with Egypt after the first review of $5.2 billion in funding. “I am pleased to announce that the Egyptian authorities and the IMF team have reached a staff-level agreement on economic policy, which could be supported by a 12-month standby agreement (SBA). The SBA, which has access requested SDR 3.8 billion (approximately $5.2 billion), supports the authorities` efforts to maintain macroeconomic stability in the midst of the Covid-19 shock, while pursuing major structural reforms. This will ensure Egypt`s progress over the past three years and provide a solid medium-term basis for sustainable recovery, stronger and more inclusive growth and job creation. The SBA will also aim to support health and social spending, improve budget transparency and pursue reforms to stimulate private sector growth and job creation. The agreement should also benefit from additional bilateral and multilateral financial assistance. As a result of imf Rapid Financing Mechanism (RFI) assistance, Egypt`s agreement aims to mitigate the economic effects of the pandemic while maintaining macroeconomic stability, strengthening the social safety net and supporting reforms that promote growth and job creation in the private sector, he said. Inadequate social protection measures in the IMF programme There are a number of serious concerns about these social protection measures.
First, the government`s commitment to funding them is not clear. The World Bank documents show that it intends to set aside 10 to 15 per cent of savings from social investment subsidy reductions. According to the IMF report, about 1% of tax savings will be spent on additional food subsidies, remittances to elderly and poor families, and other targeted social programs. Second, programs use a “proxy means test” to identify eligible households in certain districts. The simulations estimate an exclusion error of up to 59%, which is significant. In addition, weak governance makes programs vulnerable to abuse and manipulation. Most importantly, the scope of the programs is too limited; They aim to cover about 1.5 million households by 2019; This represents about 40% of the poor, which means that the remaining 60% will be exposed to the effects of the rising cost of living without assistance. The Fund`s apparent lack of attention to the sequencing of reform measures has a negative impact on overall economic performance and on the status of economic and social rights. For example, subsidy cuts were accelerated before the Egyptian government put in place the technical capacity to properly implement social protection programmes for the poor. Without an adequate social safety net, the standard of living of millions of Egyptian households already living in poverty is likely to fall further, while many middle-class households are at risk of falling into poverty. All this is part of a context of huge corruption scandals and a growing military industrial complex that is distorting the market.