- Head of International Monetary Fund (IMF) has announced yesterday that Egypt must pursue economic reforms despite need to protect poorest of north African state's citizens from high food prices through government subsidies.
IMF managing director Dominique Strauss-Kahn said this in capital Cairo, during a press conference on economic progress in Egypt, as hiking food prices continue to haunt Egyptian society.
Soaring food prices triggered violent protests in some areas of Egypt earlier this year, prompting government to raise public sector salaries by 30 percent and then nudge up fuel prices to finance wage increase.
Reports show that urban inflation soared to a fresh 16-year high of 23.6 percent in year to August, led by food and fuel price rises.
"IMF is not arguing that subsidies should disappear, because part of population may need it to smooth effect of rising prices," Mr Strauss-Kahn said.
"Government is right to concentrate subsidies on those who need it most," he added.
But he said IMF forecast global food prices would follow fuel prices lower in coming months and told Cairo to continue its efforts to liberalise economy.
He said Egypt "should not, because of inflation, abandon or postpone all that has been on track in structural reforms," adding that it is of utmost importance for Egypt to go on with reform that has begun.
He said there was a lot of work to do, to make a cleanup of subsidy part of budget. He also expressed his confidence and conviction that government would do just that.
Reports indicate that food subsidies for poor, especially of bread, are an essential component of Egypt's economic policy, allowing millions of town dwellers to survive on low salaries.
They further show that Egypt, facing public anger over rising prices of basic commodities, has left price of subsidised bread unchanged even as it reduced fuel subsidies in May to finance pay rises for public sector employees.
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