The IMF Prescribes More Poverty to Egypt at Marrakech Annual Meetings
Inflation was the only exception raised by Egyptian finance minister Mohamed Maait during his multiple bilateral talks with representatives of rating agencies and international banks, on the sidelines of the IMF-World Bank annual meetings that wrapped up few days ago.
In one of those meetings he said current economic conditions – with a growth an average growth rate of 4% -were much better compared to 2011-2015 when average GDP growth stood at 3%, while unemployment rate was now 7.2% now compared with 12.4% about 8 years ago. “Economic conditions are in a stronger position now,” he was quoted as saying in a finance ministry statement.
At a time when Egypt’s credit rating was downgraded to its level ten years ago, the minister could still boast that “the general financial conditions of the state were currently better than their levels during 2011-2015,” citing a fiscal deficit at 3.9% of GDP and a budget surplus in 2017 amounting to 1.63% of GDP, which reflected “a commitment of the ministry to fiscal discipline and to reducing overall deficit to an average 6% from 11.2%”.
What is striking or rather ironic are the inflation rates that Maait mentioned as the sole exception in his record of achievements. Higher prices led to a surge in poverty rates to the highest levels in the country’s history, as was shown in an independent study unveiled in Cairo last Sunday while the minister was in Marrakech.
The study found a worsening of poverty rates in 2023 to 35.7% compared to 29.7% in 2020-2019, when the government announced its latest official figures on poverty as part of a research on revenue, spending and consumption published by the Central Agency for Public Mobilization and Statistics.
The findings of the study, conducted by an advisor at the Central Agency for Public Mobilization and Statistics, were announced after a ten-month delay. This was due to the approaching presidential elections at a time the popularity of President Abdel Fattah El-Sisi is decreasing on the back of a rise in inflation rates.
The rapid surge in poverty rates to record levels was linked to an increase in inflation rates to its highest levels in Egyptian history, exceeding the 40% threshold last September. These spikes were due primarily to the devaluation of the pound in implementation of IMF deals agreed between 2016 and 2022.
During that period, the value of the pound depreciated by nearly 70% against the dollar moving from 9 pounds per dollar seven years ago to 30 pounds now.
In light of the close link between poverty and inflation rates- which led to the devaluation of the pound as per the IMF deal- the Automn meetings saw the IMF chief Kristalina Georgieva announce a review off the deal with Egypt before year’s end.
The first review was planned for last March but has not been carried out yet, amid analyses showing a direct correlation between Egypt’s delay in further pound devaluation following Georieva’s criticism of a policy to stabilize the Egyptian currency.
Georgieva’s recent announcement of an impending review meant a new devaluation of the pound was looming which would lead to an unimaginable spike in inflation rates and consequently a worsening of poverty. Such a scenario is expected following the presidential elections due next September.
This was a brief overview of the relation between the IMF and Egypt. The two parties constantly voice satisfaction with improving economic indicators, despite the resulting poverty and degradation of living conditions. Meanwhile, the IMF-World Bank annual meetings did not bring any good news.
What is worth mentioning this time was that harsh austerity, with all the impoverishment it entails, did not lead to financial stability as was promised. On the contrary, few days after the minister bragged about an improvement in macro-economic indicators in front of rating agencies and multilateral banks, Standard & Poors downgraded Egypt’s credit rating.