Abstract

Over the past 60 years, Egypt’s fiscal and monetary policies, and their combination, have undergone significant shifts. With the Central Bank of Egypt directing monetary policy and the government overseeing fiscal policy, conflicting objectives have often arisen. Coordination, or the lack thereof, has profoundly impacted Egypt’s trajectory in terms of growth, debt, and inflation. This chapter explores the complex interplay between fiscal and monetary policies in Egypt, aiming to synthesize the existing literature and assess its relevance to the economy’s experience. It also compiles substantial research on Egypt’s monetary–fiscal dynamics to piece together a comprehensive understanding. Section 6.1 systematically surveys the theoretical literature on monetary–fiscal policy interactions. Section 6.2 chronicles the history of these interactions in Egypt, particularly during economic cycles, structural adjustment programs, and times of political instability. Empirical findings are discussed in section 6.3 within the context of the country’s institutional framework. Finally, section 6.4 examines recent developments, opportunities, challenges, and required reforms to enhance the ability of the policy mix to achieve its economic stabilization objectives.