IMF urges Egypt: Continue reforms despite protests over austerity

The International Monetary Fund said Thursday that Egypt should press ahead with economic reforms needed for a $12 billion loan despite rising public discontent at the cost of living. The government of President Abdel Fattah al-Sisi is rolling out an austerity program and seeking billions in financial support from other countries in order to meet conditions necessary for the IMF’s loan program – moves which threaten to increase public anger.

“We think that the reforms that the government is undertaking are headed in the right direction,” IMF spokesman Gerry Rice told reporters in Washington. “That doesn’t mean they’re easy to do. They’re difficult. There's going to be disagreement and differences and maybe even protests.” Egypt is reeling after six years of political and economic turmoil involving the ousters of two presidents.

Loans from Saudi Arabia and China will help Egypt gather the $5-$6 billion in additional financing required to complement the IMF lending, according to Rice. Given that “good progress" toward securing the bilateral funds, the IMF program could come before the Fund’s board of directors for approval “in the next few weeks,” he said.

Rice said Cairo had adopted a new budget, approved a value-added tax, and developed a plan on energy subsidies, and that the central bank planned a gradual move toward a more flexible exchange rate. He stressed however that the IMF’s planned $12 billion loan program did not call for cuts to food subsidies. Egyptian consumers have faced stinging shortages in rice, sugar, cooking oil and baby formula.

“A lot of the protest seems to be aimed at the issue of food subsidies, and I just want to make clear that the IMF program does not call for any cuts in food subsidies,” said Rice. “In fact, it provides for increases in the food subsidy budget to help people get through the early months of adjustment. Of course, it’s up to the Egyptian government to decide which subsidies will be increased.”