Egypt eyes tough reforms in last-ditch bid to save economy

Egypt hopes a $12-billion financing deal with the International Monetary Fund (IMF) will usher in an economic turnaround but real progress hinges on a tough reform package avoided for decades to stave off unrest.

The financing over three years — deemed an endorsement to attract more foreign aid — would go together with a currency devaluation and streamlining of Egypt’s bloated subsidy system.

But experts warn that the loan alone would serve as little more than an “aspirin” and a stopgap for a deep-rooted economic malaise.

In a country where many rely on state subsidised bread and imports for basic foodstuffs such as wheat, inflation has already risen at a time of low foreign currency reserves and a thriving black market exchange.

More than five years after its 2011 uprising — partly fuelled by economic disparities — that swept away veteran strongman Hosni Mubarak, the country is still reeling from the fallout.

The dire state of the economy, according to President Abdel Fattah Al Sisi, makes the long deferred economic reforms inevitable.

“All the hard decisions that many over the years were scared to take, I will not hesitate for a second to take them,” he said in speech on Saturday, days after Egypt signed the preliminary deal with the IMF.

The government has proposed a reform package to narrow the budget deficit — about 13 per cent of GDP — that includes cuts to power subsidies and a value added tax to raise revenue.