The Egyptian economy is showing signs of recovery, as the devaluation of the local currency has resulted in a significant increase in exports, the IMF has concluded, according to an 8 August report in the Cairo daily Al-Ahram.
The daily says that the IMF, which has just finished its annual Article IV consultations, forecasts real gross domestic product (GDP) growth of 3.5-4.0 per cent in 2002/03 (July-June), compared with 2 per cent in 2001/02.
The report notes that the Egyptian pound fell by about 35 per cent against the dollar between mid 2000 and the start of 2002. Taking into account the recent rise in the value of the euro against the dollar, the IMF estimates the actual level of depreciation of the local currency up to mid 2002 at 25 per cent, Al-Ahram says.
The devaluation has been reflected in a sharp reduction in the trade deficit, with the result that the current account is virtually in balance. The report says the IMF expects further increases in non-oil exports and tourism income to offset any rises in imports, with the result that the Central Bank of Egypt will not be required to intervene to support the Egyptian pound.
The IMF cautions that the government needs to avoid any further increases in the budget deficit, and that monetary policy should be refined to allow for more flexibility in domestic interest rates.
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