Editor’s Note: January 30, 2019

Are Egypt’s reforms working?

The International Monetary Fund is preparing to disburse the fifth tranche of a $12bn three-year loan taken out by Egypt in late 2016, lauding Cairo’s “substantial progress” on fiscal reform.

Since securing bailout Egypt has been on a reform drive to boost growth and investment. This includes floating its currency in late 2016 and deep spending cuts to rein in its deficit.

This has helped consolidate fiscal stability. The deficit is falling and official unemployment has hit 10%, the lowest since the 2011. Foreign reserves have more than doubled to $44.59bn since 2016, and the IMF is projecting growth of 5.5% this year.

Sounds good, but it’s premature to celebrate.

Egypt’s debt has almost doubled since 2016, hitting $92.64bn last year, with the government spending more than 40% of revenue on debt-servicing – worrying figures against the backdrop of rising interest rates in developed markets.

And while the IMF is happy, there is the question of whether Egyptians are actually benefiting.

Inflation has dropped to 11.1%, but hit a three-decade high of 31.5% in 2017. It’s unclear how this has impacted the population –  the government has not released poverty data since starting the IMF programme – but it’s estimated that it could have increased the poverty rate to 35%, up from 28%.

It’s a mixed bag.

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