Cairo: Egypt’s economy will grow at a slower rate of 3.5 per cent over the 2016/17 fiscal year, missing the government’s target of around 5 per cent and dipping below last year’s growth rate forecast, a Reuters poll found.

The poll, which surveyed 13 analysts, predicts that growth will pick up the following year to reach 4 per cent, unchanged from previous predictions. It also expects growth to reach 4.5 per cent in 2018/19.

Egypt’s economy grew 4.5 per cent in the first half of the financial year 2015/2016, which ended in June. Official figures for the full year have yet to be published, although the full year was forecast by economists to grow 4.1 per cent.

Egypt has been struggling to recover economic growth since a 2011 uprising drove away tourists and foreign investors, straining the country’s reserves which fell from around $36 billion in 2011 to $17.5 billion last month.

The dollar shortage has forced Egypt to introduce capital controls that have hit trade and growth, and saw the value of the Egyptian pound weaken on the black market to a record 13 per dollar as expectations of a second devaluation this year mounted.

The central bank has been trying to balance the need for economic growth while keeping inflation at bay, but the annual urban consumer inflation jumped for the third month in June, reaching 14 per cent from 12.3 a month earlier.

Inflationary pressures

Analysts polled by Reuters put the consumer price index at 11.5 per cent for the current fiscal year, up from a previous forecast of 11 per cent. They expect CPI to ease in 2017/18 to 11.2 per cent and ease further to 9 per cent the following year.

In an attempt to curb inflationary pressures, the central bank hiked interest rates by an aggressive 100 basis points at its last monetary policy meeting on June 16.

The committee is due to meet on Thursday for another decision on rates. Economists expect Egypt’s central bank to keep rates unchanged.

Egypt announced on Tuesday that it is close to agreeing on an International Monetary Fund (IMF) lending programme to secure $12 billion over three years that will help restore market stability and ease a funding gap.

The IMF lending programme will mean that Egypt has to push forward with painful economic reforms including a value added tax (VAT) and subsidy cuts that were put on hold when global oil prices dropped.

A VAT bill is in its final stages but has faced resistance in parliament due to concerns over inflation, which has touched seven-year highs since the currency was devalued by 13 per cent in March.