IMF on Egypt

Here's what the IMF said after a recent visit to Egypt [bold mine]:

"Job creation is the paramount challenge facing the Egyptian authorities today. Indeed, the ongoing reforms are aimed at laying the ground for sustained private sector-led investment and growth. The next phase of reforms would need to reduce the constraints on private sector activity arising from weaknesses in financial intermediation, absorption of a large share of national savings by the public sector, and bureaucratic barriers to business development. Implementing these reforms will require building a strong political and social consensus. At the same time, the timing is appropriate, given the unique combination of favorable economic conditions, the strong reform momentum, and growing investor confidence.

"The IMF team views fiscal policy as the key to maintaining macroeconomic stability. The budget deficit and public debt in Egypt--while still manageable--are relatively high, and cannot be sustained at current levels without compromising Egypt's economic potential. The recent tax reforms were an important development, and need to be complemented by an ambitious and credible medium-term fiscal consolidation strategy that puts public debt as a share of GDP on a firmly declining path. Toward this end, the authorities agreed with the team on the need for a comprehensive expenditure reduction program, aimed at rationalizing the size of government, increasing the productivity of expenditure, and improving the targeting of pro-poor spending. Meanwhile, the team welcomes the authorities' structural reform efforts aimed at streamlining cash management.

There's more there for a quick snapshot of the Egyptian economy. In many ways, it is true there have been improvements in the management of the economy and an increase in the business confidence. But, on the social and political level (as reflected in what the papers say and my impression of the feeling on the street) the Nazif government is failing. It has not convinced Egyptians that it has a vision for the country's future, is seen as a government of technocrats and cronyism, and there is considerable alarm about the rise of the "businessmen ministers" such as Minister of Transport Muhammad Mansour or Minister of Housing Ahmad Maghrabi. Even if you want to give the Nazif government the benefit of the doubt, I suspect for that many Egyptians the problem is that they're hearing a lot of neo-liberal technocratic prattle but little that is reassuring about new jobs, their pensions, social welfare, etc. Any economic reform effort is also hurt, of course, by the lingering political crisis caused by the rise of an anti-Mubarak movement and the uncertainty over his succession. This means that, no matter how good for the country IMF-led reform might be (a controversial point in itself), the regime is not selling idea to the general population.