Un-edited notes from the press briefing of Masood Ahmed, the director of the Middle East and Central Asia Department at IMF. 

IMF economic forecast of ME

· Growth will be slow 2% slower than 2 years ago before and is lower than the ability to deal with high unemployment especially for Youth 

· In the next years, recovery will be too slow to cover new jobs let alone old unemployment. 

· Increase in fuel and food subsidy increased the fiscal deficit 

· The authority ability to postpone difficult decisions is limited. Yet changes aiming at inclusive growth and equal access to opportunities will lead to better prosperity in the medium and long term future 

· IMF is ready to support Egyptian program developed by the authority that addresses the main challenges e.g. fiscal imbalance, enjoys broad support to be implemented and that has adequate finance. 

· IMF was in Cairo in August. The govt will develop economic program. The Egyptian government invited the IMF to send a technical team by the end of this month to conclude program assessment. This means that the program is near ready 

· Egypt economy was affected by external shocks (global economic crisis) as well as the uncertainty of economic activities due to the political transition. There will be relatively low rate growth 2% and may be 3% next year. This is well below the growth needed to generate jobs. 750,000 joined market last year. In the medium term three is a strong diversified economy and Egypt has a strategic location (not sure how this affects economic growth)

Question: The IMF must be aware of Egyptian popular concerns on: transparency, how the loan will be used, what are the conditions of the loan, how it will be paid, and the huge debt burden that will result from the loan opening the door to further borrowing 

Answer:

These are important concerns for many people 

• Transparency: any programme has to be explained so that people understand the content. We will publish the agreed program and loan 
• IMF supports nationally developed program. The benchmarks are set by the country and not as conditions by IMF. Of course, IMF must ensure that the economic program will address the issues that face the countries. We must take a close look that the program will achieve objectives and that the money is well- used rather than just add it to the debt. 
• Debt worries many people but everyday Egyptian authorities take more debt to finance budget deficit. Yet the IMF is an easier way financially than borrowing from other sources where rate is high, such as internal borrowing which also deprive private sector from bank financing.
• The real issue is to implement policies to reduce deficit which drives the need to financing. So we try to make sure that policies will achieve objectives in a way which does not adverse poor people. 

Question: People are not sure that borrowing is needed without sound economic policies and plan and without looking at other sources of revenue. Will the IMF help with, for example tax reforms that generate tax from rich people rather than punish small businesses? Or will it advice for regressive, easy to collect tax like VAT. 

Answer

• IMF financing is temporary but the key is to use it to deal with structural things. Tax and rationalisation of subsidy take time but should get done if we focus on them. I don’t disagree with you. They are the sustainable solutions in the long term 
• IMF can ease the process by giving more time to deal with these structural problems through making available financial resources and sharing experience of other countries that dealt with similar problems 

Question How close is Egypt to entering financial crisis? 

Answer 

There are problems including the running down of foreign reserve from $35b to $15b and increased vulnerability of the economy. However, over the last few months, there has been a stabilisation in reserves with slight up reflecting market confidence which in turn reflects a combination of the political transition and the underlying strength of the Egyptian economy as well as the fact that the government is putting a program. They are putting a program to deal with short term challenges 

Question: IMF is identified by SAPS program under Mubarak and therefore you have credibility problems-would you defend this program which is full-heartedly rejected in Cairo? Is social inclusion included in negotiations? 

Answer

• We had not had a program in Egypt for a decade so lots of the changes are not due to IMF. But we learnt lessons from the Arab spring. We cannot look at the aggregate numbers of growth but we need to see how the benefit is shared, access to opportunities, and the impact of growth strategy on employment. These micro issues are not traditional the areas of expertise of the IMF. It is important to work with WB, ILO for better understanding of these micro effects 
• Now there is more focus at IMF to make the link between aggregate macro numbers and implications for employment and inclusion 
• This is reflected in programs. We set a floor for spending on social sectors and a ceiling on overall expenditure. The focus is on protecting vulnerable populations 
• It is a learning process, a journey on how to incorporate these aspects in our political work 

End