Egypt's economic difficulties Table 1.1: Egypt, selected economic indicators, 2014–2019 | | Consumer Price Index (base year 2000) | Current account balance (US$ billion) | Unemployment rate (% of total labour force) | |---|-------------------------------------|------------------------------------|---------------------------------------------| | 2014 | 304 | –2.356 | 13.4 | | 2015 | 337 | –12.182 | 12.9 | | 2016 | 371 | –18.659 | 12.7 | | 2017 | 453* | not available | 12.6* | | 2018 | 530* | not available | 11.8* | | 2019 | 587* | not available | 10.7* | * International Monetary Fund (IMF) estimates Source: International Monetary Fund, World Economic Outlook Database, April 2017 Egypt's Central Agency for Public Mobilization and Statistics (CAPMAS) reported that Egypt's annual inflation rate surged to 32.9% in April 2017, compared to 10.9% in 2016. This is considerably higher than the expected rate that was estimated by the IMF shown in Table 1.1. Inflation had been rising in Egypt since the decision of the Central Bank of Egypt (CBE) in November 2016 to float Egypt's currency (the Egyptian pound) in a move that caused a 50% depreciation in its value against the US dollar. This came as part of the Egyptian government's reform programme, started in 2014, to reduce the budget deficit and acquire a US$12 billion loan from the IMF to ease the US dollar shortage that had restricted Egypt's business activity. A macroeconomic research group has said that ‘The sharp rise in inflation could largely be attributed to the effects of the weaker Egyptian pound. Inflation was also made worse by levying a new indirect tax called Value Added Tax (VAT), and cutting subsidies on energy in November 2016.' On the same day as the CBE floated the Egyptian pound it raised the interest rate by 3 percentage points to 14.75%. Egypt's VAT replaced the previous sales tax, which economists said created market distortions. It was expected to broaden the tax base in a country where the government struggles to collect income tax because of a large informal economy and widespread tax avoidance. The VAT does not apply to basic goods and services to protect the poor. Source: Islam Al Naggar, Egypt Today, 10 May 2017, and Reuters, 29 August 2016