Developing countries, including Egypt, have to cut oil subsidies: IMF

Mauro’s remarks came during the press briefing the IMF held on Wednesday to release its Fiscal Monitor Report.

He was responding to a question by Ahram Online on the way the recent decision of some oil exporters to cut production places more pressure on developing countries’ budgets and fiscal policies management.

“In Egypt, the goal is to reduce the debt-to-GDP-ratio in the medium term, and the way to achieve that is to maintain primary surpluses above the 5.5 per cent of GDP, that is the objective to be achieved through securing more revenues as well as spending reductions that preserve support for the vulnerable”, Mauro stressed.

Egypt is currently engaged in an IMF-Extended Fund Facility (EFF) programme, for 46 months, that allows Egypt to secure $3 billion in loans.

Egypt filed for this loan in March 2022 to address the severe repercussions of the Russian-Ukrainian war.

Under the programme, Egypt has committed to fully implement the fuel price indexation mechanism by refraining from applying any formulaic decreases in fuel prices until fuel subsidies for each product subject to the mechanism have been eliminated in the FY 2021/2022.

In order to reduce Egypt’s debt under the loan programme, the government set a ceiling on the gross debt of GDP ratio of 92.1 percent of GDP by the end of the current FY2022/2023.

Egypt targets a primary surplus of 2.1 per cent of GDP in FY 2023/2024 and 2.3 percent of GDP in FY 2024/2025 and FY 2025/26.

It aims to curb this ratio to about 83 per cent of GDP by FY 2026/2027.

To achieve this, the government committed to increasing the tax-to-GDP ratio, through its Medium-Term Revenue Strategy (MTRS), during the current FY2022/23 by around two percent over the medium term.

During that time, Egypt will focus on both improving the progressivity of the tax system and avoiding unduly constraining productive activity and exports.

The IMF’s and World Bank Group’s annual meetings (spring meetings) are being held in Washington DC through 16 April under the theme “The Way Forward: Building Resilience and Reshaping Development”.