Egypt: will the government’s fiscal reforms be enough?

The big fiscal squeeze that the Egyptian government has signed up for as part of its IMF deal will, if fully implemented, bring the debt ratio down. However, the authorities are likely to struggle to meet the targets set by the Fund and we suspect that some of the envisaged austerity will slip. This may lead to bouts of market volatility around the time of the IMF reviews and cause bond yields to remain high.