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Saturday, 05 December 2020

Egypt hopes to overcome the negative economic impact of the coronavirus ‘soon,’ finance minister tells MPs

Finance Minister Mohamed Maait said the government will amend the draft 2020/2021 state budget to include increased allocations for health care, among other changes

Gamal Essam El-Din , Tuesday 21 Apr 2020
Egypt
Egypt's Finance Minister Mohamed Maait (Al-Ahram)
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Finance Minister Mohamed Maait told MPs on Tuesday that Egypt hopes to overcome the economic difficulties caused by the coronavirus pandemic "soon."
 
"We hope that Egypt will soon be able to get out of this crisis and overcome its negative impact with minimum losses, in terms of subsidising the under-privileged classes and completing the development path at the same time," said Maait. 
 
Maait, who was addressing MPs on the draft state budget for the 2020/2021 fiscal year, which begins on 1 July, said that the outbreak hit Egypt “at a time when the country was moving on the right path towards building a strong economy capable of absorbing shocks and winning the confidence of international institutions and investors."
 
"We know that citizens have suffered the burdens of a very harsh economic reform programme for three years – between 2016 and 2019 – and so we are doing our best to soften the blow of the coronavirus on the lives of citizens and guarantee them a better future,” he added.
 
Maait said that the first half of Egypt's current 2019/2020 fiscal year had seen a 5.6 percent GDP growth rate, the highest ever in Egypt's history.
 
"We also reduced the unemployment rate to 8 percent, secured a budget surplus of EGP 40.4 billion and increased public investments by 23 percent," said Maait, indicating that "the outbreak of the coronavirus will oblige the state to amend the new 2020/2021 budget, but it is too early to introduce any amendments."
 
"Once we decide any amendments in light of the coronavirus, we will come and explain these to you," Maait told MPs.
 
He said, however, that the pandemic had led the government to earmark greater allocations for two sectors: health care and education.
 
"The health care allocations in the new budget will increase by EGP 78.9 billion, or from EGP 166.6 billion in the 2019/2020 fiscal year to EGP 245.5 billion in the 2020/2021 fiscal year," the minister said.
 
In a plenary session on Tuesday, parliament approved amending the 2019/2020 budget to earmark an additional allocation of EGP 10 billion to mitigate the economic cost of the coronavirus and stimulate the economy at the same time.
 
Parliament speaker Ali Abdel-Aal, however, said a final vote on the EGP 10 billion amendment will be taken tomorrow.
 
Planning Minister Hala El-Saeed also addressed MPs on the new 2020/2021 development plan.
 
She said the success of Egypt's economic reform programme has helped the country face the challenge of the coronavirus.
 
"This programme achieved an unprecedented 5.6 percent economic growth in the first half of the 2019/2020 fiscal year, reduced inflation to 5 percent, and raised foreign reserves to $45 billion, enough to cover eight months and half of imports," said El-Saeed.
 
"However, while we were reaping the fruits of this programme, the coronavirus arrived and hit us, making us change policy course," she noted.
 
"The crisis forced the state to allocate EGP 100 billion to support the severely damaged sectors of health, tourism and industry, and also to stimulate the Egyptian stock market and help the seasonal workers who were severely impacted by the anti-coronavirus measures," said El-Saeed.
 
According to El-Saeed, given that the pandemic is expected to cause a deep recession globally, Egypt expects a loss of 60 percent in tourism revenues.
 
"We also expect a drop in remittances from Egyptian expatriates and in revenues from exports and the Suez Canal," said El-Saeed.
 
El-Saeed said the outbreak of the coronavirus forced the government to change the objectives of the 2020/2021 development plan to focus on preserving the lives of Egyptian citizens, in terms of offering adequate health care and improving living conditions.
 
"Instead of achieving sustainable development, the new plan will focus on the new priorities of facing the challenge of the coronavirus, such as implementing health and social programmes that aim at containing the negative effects of the crisis," said El-Saeed.
 
She said the planning ministry has developed two possible scenarios for the path of the crisis.
 
"The first one forecasts that the coronavirus will be under control in three months -- or between April and June this year -- and this will be good, as it comes ahead of the implementation of the plan at the end of June," said El-Saeed, adding that "we hope that this scenario is the most likely one."
 
The second scenario forecasts that the coronavirus will be under control at the end of 2020 and “in this case we will change the course of the plan," she said.
 
Regardless of the path the pandemic takes, El-Saeed said that “we see it … as both a gift and crisis."
 
"It is a gift because it gives the industrial sector the chance to exploit the drop in imports and move to fulfil the country's basic needs and boost Egypt's exports to foreign markets," said El-Saeed.
 
"But the coronavirus will be a crisis if it continues until the end of this year so that its negative impact covers next year," she warned.
 
“However, even under this scenario, we expect just a 30 percent negative impact on our development plans," said El-Saeed.
 
Parliamentary speaker Ali Abdel-Aal said the figures of the new budget and development plan are "generally optimistic.”
 
"But these figures will remain tentative and provisional, as the major sovereign revenues coming from tourism, workers' remittances, and Suez Canal traffic will be negatively impacted by the coronavirus, and so it is quite difficult to forecast what scenario we will face," he said, urging the government to take advantage of the crisis to boost domestic industry and agricultural exports. 
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