IMF: Egypt's Inflation Rate to Drop 13% by End of 2017

Pedestrians walk past the International Monetary Fund headquarters’ complex in Washington. AP
Pedestrians walk past the International Monetary Fund headquarters’ complex in Washington. AP
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IMF: Egypt's Inflation Rate to Drop 13% by End of 2017

Pedestrians walk past the International Monetary Fund headquarters’ complex in Washington. AP
Pedestrians walk past the International Monetary Fund headquarters’ complex in Washington. AP

The International Monetary Fund (IMF) expected that inflation levels will fall sharply in Egypt by the end of this year, having risen at an accelerated pace due to reforms recommended by the international institution and applied by the country since November.

“The Central Bank of Egypt (CBE) remains committed to achieve its goal of reigning in inflation which is expected to decline to about 13 percent in the quarter ending December of 2018,” the IMF said in a statement on Friday, explaining that this rate constitutes about one third of the value of inflation, which has amounted to 32.1 percent from January to September.

The IMF's recommendation to liberalize the exchange rate prompted the CBE to lift local currency subsidy in November 2016, leading to the drop of the value of the Egyptian pound to more than half and the rise in inflation.

However, its monetary policy framework was underpinned by a flexible exchange rate regime which has eliminated chronic foreign exchange shortages and the parallel market.

Notably, Egypt has concluded a deal with the IMF in November 2016 to receive $12 billion in order to support reform processes.

The Fund team visited Cairo from October 25 to November 9, 2017 for discussions under Article IV of 2017 and for the second review of the performance of the International Fund for Agricultural Development (IFAD)-supported economic reform program.

At the end of the mission the IMF team issued a statement, indicating that Egypt has reached a staff-level agreement with the IMF for an installment of about $2 billion more from a three-year, $12 billion loan program.

“The payment, still subject to IMF executive board approval, will bring total disbursements under the program to about six billion dollars. Egypt is pushing through ambitious economic reforms under the loan deal,” the statement said.

As part of a second review, the IMF said broad reforms, which included a floatation of the pound currency, were beginning to pay off in terms of "macro-economic stabilization and return of confidence."

"While the reform process has required sacrifices in the short term, seizing the current moment of opportunity to transform Egypt into a dynamic, modern, and fast-growing economy will improve the living standards and increase prosperity," it added in its statement.

The IMF noted growth for the 2016/17 fiscal period had picked up to 4.2 percent compared to a forecast 3.5 percent, the current account deficit in dollar terms had narrowed and portfolio investments and foreign direct investment had increased.



Oil Falls Nearly 4% as Iran's Retaliation Focuses on Regional US Military Bases

FILE PHOTO: A meter shows the gas pressure in pipelines at oil and gas group MOL's gas transmission subsidiary in Vecses January 2, 2009.  REUTERS/Karoly Arvai (HUNGARY)/File Photo
FILE PHOTO: A meter shows the gas pressure in pipelines at oil and gas group MOL's gas transmission subsidiary in Vecses January 2, 2009. REUTERS/Karoly Arvai (HUNGARY)/File Photo
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Oil Falls Nearly 4% as Iran's Retaliation Focuses on Regional US Military Bases

FILE PHOTO: A meter shows the gas pressure in pipelines at oil and gas group MOL's gas transmission subsidiary in Vecses January 2, 2009.  REUTERS/Karoly Arvai (HUNGARY)/File Photo
FILE PHOTO: A meter shows the gas pressure in pipelines at oil and gas group MOL's gas transmission subsidiary in Vecses January 2, 2009. REUTERS/Karoly Arvai (HUNGARY)/File Photo

Oil prices slipped more than $3, or 4%, on Monday after Iran attacked the US military base in Qatar in retaliation for US attacks on its nuclear facilities, and took no action to disrupt oil and gas tanker traffic through the Strait of Hormuz.

Brent crude futures were down $2.91, or 3.8%, at $74.09 a barrel by 1:13 p.m. ET (1713GMT). US West Texas Intermediate crude (WTI) eased $2.8, or 3.8%, to $71.06, Reuters reported.

"Oil flows for now aren't the primary target and is likely not to be impacted, I think it's going to be military retaliation on US bases and/or trying to hit more of the Israeli civilian targets," said John Kilduff, a partner at Again Capital.

US President Donald Trump said he had "obliterated" Iran's main nuclear sites in strikes over the weekend, joining an Israeli assault in an escalation of conflict in the Middle East as Tehran vowed to defend itself.

Israel also carried out fresh strikes against Iran on Monday including on capital Tehran and the Iranian nuclear facility at Fordow, which was also a target of the US attack.

At least two supertankers made U-turns near the Strait of Hormuz following US military strikes on Iran, ship tracking data shows, as more than a week of violence in the region prompted vessels to speed, pause, or alter their journeys.

About a fifth of global oil supply flows through the strait. However, the risk of a complete shutdown is low, analysts have said.

A telegraphed attack on a well defended US base could be a first step in reducing tensions provided there are no US casualties, Energy Aspects said in a post.

"Unless there are indications of further Iranian retaliation or escalation by Israel/the US then we may see some geopolitical risk premium come out of the price in subsequent days," it said.

Qatar said there were no casualties from the attack on the US military base.
Iran, which is OPEC's third-largest crude producer, said on Monday that the US attack on its nuclear sites expanded the range of legitimate targets for its armed forces and called Trump a "gambler" for joining Israel's military campaign against Iran.

Meanwhile, Trump expressed a desire to see oil prices kept down amid fears that ongoing fighting in the Middle East could cause them to spike. On his Truth Social platform, he addressed the US Department of Energy, encouraging "drill, baby, drill" and saying, "I mean now."

Investors are still weighing up the extent of the geopolitical risk premium, given the Middle East crisis has yet to crimp supply.

HSBC expects Brent prices to spike above $80 a barrel to factor in a higher probability of a Strait of Hormuz closure, but to recede again if the threat of disruption does not materialize, the bank said on Monday.

Iraq's state-run Basra Oil Company said international oil majors including BP, TotalEnergies and Eni had evacuated some staff members working in oilfields.