Egypt Youth Unemployment Was 'Time Bomb': IMF Head

Mandel Ngan | AFP | Getty Images IMF Managing Director Dominique Strauss-Kahn

Youth unemployment in Egypt and Tunisia was a ticking "time bomb", IMF chief Dominique Strauss-Kahn told CNBC Tuesday, adding that he had warned of such a situation developing back in the summer.

"I remember that this summer I made a speech in Morocco about the question of youth employment including Egypt, Tunisia, saying it is a kind of time bomb and that one of the main concerns the government may have around the region was to try to fix this problem because it couldn't last very long," he said.

He said despite positive indicators at the macroeconomic level, it was impossible to ignore the high levels of inequality that existed.

"Such a high level of unemployment, especially youth unemployment, and such a high level of inequality in the country create a social situation that may end in unrest."

Egypt's economy is expected to have grown by an annualized 6 to 6.2 percent in the October to December quarter but 18 percent of the population still lives below the poverty line and official unemployment is running in the double-digits.

"You cannot expect to have nice economic development without having the society as a whole following," Strauss-Kahn added.

The IMF's Role

Strauss-Kahn said that while the IMF could not play a direct role in Egypt because its mandate revolved around macroeconomic and financial flows, the fund had to increasingly look beyond figures and "look at the way society behaves" to provide a "nice environment for growth".

"In many countries the tension between the different parts of the society have increased, and that's why we are more and more involved in the countries where we work, with the unions, civil society organizations, and try to take this into account," he added.

Kahn says the IMF advises countries to keep aside some resources, even when they are scarce, to help the most vulnerable and poor.