In Egypt’s attempt to reform its economic distress in the past several years marked by political unrest, declining tourism, foreign currency and fuel shortages, the government adopted an economic reform program to improve Egypt’s public finances. In order to face existing structural problems, Egypt obtained an Extended Fund Facility (EFF) from the Executive Board of the International Monetary Fund (IMF), to tackle these challenges.

The prevailing challenges include foreign currency devaluation, drainage of foreign reserves, significant reduction in tourism, budget deficit and public debt values that exceed Egypt’s total Gross Domestic Product (GDP). The adopted IMF reform policy aims to restore macroeconomic stability, create jobs and promote growth, correct external imbalances, restore competitiveness and place the budget deficit and public debt on a declining path while protecting vulnerable groups.

In November 2016, authorities introduced the value-added tax law (VAT) and a free-floating currency, and raised the price of subsidised fuel. While these measures may seem harmful in the short-term to producers and consumers, they are expected to gradually yield positive results, especially in terms of foreign direct investments (FDI) and the inflow of foreign currency into the economy, along with an improved fiscal governance. According to World Bank Economic Outlook, April 2018, real GDP is forecasted to grow by 5% in FY18, and to increase gradually to 5.8% by FY20. Meanwhile, Moody’s credit ratings outlook for August 2018 concluded that despite a series of negative shocks, it believes that Egypt retains the region’s highest economic strength assessment, which reflects its potentiality for future growth, with a rating of B3 (Positive).

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