Egypt's Minister of Finance Mohamed Maait said that the private sector is the backbone of Egypt’s economy and that the ministry is working on removing any obstacles that investors and businessmen are facing.
Maait said during the Euromoney Conference that Egypt will continue facing external and internal challenges on its way to economic reform.
“The road is still long for Egypt, but we are confident that our continued collective efforts, both in the government and the private sector, will firmly place Egypt as a leading and rising economic power, and ultimately bring prosperity to the Egyptian people,” the minister said.
Maait told Ahram Online that what has been reported about increasing taxes is completely false, and that the Ministry of Finance's upcoming amendments to the income tax law will not change the current tax rate.
“There are many countries around the world that are affected by the global unrest, especially the looming recession and the trade war, but not Egypt, which reassures that it is a strong country with a strong fiscal system and monetary policy," he said.
Maait added that Egypt has a large and young population that can support and sustain a robust growth path that brings prosperity to all Egyptians.
“At the same time, the government has been working hard to achieve and maintain macroeconomic stability and secure solid foundations for a competitive and dynamic private sector. As the first phase of our ambitious and comprehensive home-grown reform programme ended last June, we can now report with pride about the positive outcomes achieved so far,” he said.
The minister also said at the annual gathering that the country has built a reputation for providing timely insights about its economic progress and potential opportunities.
“Our economy grew by 5.6 percent in fiscal year 2018/19, making it one of the top growth performers among emerging markets and enabling Egypt to resume its high growth profile after a decade of sluggish and below potential growth,” Maait said.
The minister also highlighted that Egypt is heading towards a healthier and more balanced growth profile with investments and exports becoming key growth drivers.
Moreover, the realised high growth rates have been quite diversified, with notable contribution from key sectors including manufacturing, tourism, construction, trade and oil and gas.
Furthermore, according to Maait, this growth has decreased unemployment to 7.5 percent in June 2019, down from 13 percent a few years ago.
“We are committed to continue increasing the size of our labour market and implementing reforms that generate more productive jobs. We believe that job creation is the key to growth and is among our top priorities,” he said.
Maait said that the adoption of proactive and prudent monetary policy has led to significant improvements, including bringing inflation rates back down to single digits, and that this is enabling a more accommodative monetary that allows lowering interest rates.
“The Nominal Interest Rate (NIR) peaked to reach $45 billion by the end of August 2019, hence covering more than eight months of imports. The FOREX market has been operating smoothly. This reflects significant improvement in the external sector, with both the account and trade balances improving,” he clarified.
“Our budget figures and fiscal stance improved notably as the fiscal deficit reached 8.2 percent of the GDP, down from a record high of 16.5 percent in FY 2013/14. The overall deficit is expected and projected to continue a downward path to record 7.2 percent of the GDP in FY 2019/20 and 6.2 percent FY 2020/21. This comes on the backdrop of stronger efforts of expenditure re-prioritisation and improved revenue mobilisation through widening the tax base and enhancing the efficiency of tax collection,” according to Maait.
In FY 2018/19, Egypt recorded an unprecedented primary surplus worth 2 percent of the GDP, which is in line with the government’s target after recording a deficit of around 8 percent back in 2013/14. The primary balance will be maintained at 2 percent of the GDP over the medium term, Maait said.
“It is important to note that despite the ongoing broad fiscal consolidation efforts, the economy has been growing and is projected to continue doing so,” he added.
Maait asserted that the debt trajectory is on a downward path thanks to pro-growth fiscal consolidation. Budget sector debt declined to 90.2 percent in 3 June 2019, down from 107 percent of the GDP in FY 2016/2017. It is expected to reach 83 percent of the GDP by June 2020 and 77.5 percent in June 2022.
"Our medium-term debt strategy aims to put debt on a sustainable path while extending our average debt maturity while expanding and diversifying our investor base," Maait said.
"We also aim to diversify the government’s sources of financing between domestic and external to ultimately broaden demand and lower the debt service burden cost simultaneously.
“I would like to reassure that our commitment to reforming Egypt’s economy remains strong and will not be reversed under any circumstances. We will continue to roll out bold reforms to tackle structural imbalances and improve the standards of living for all Egyptians,” according to Maait.
The minister said that after achieving macroeconomic stability through implementing bold monetary and fiscal reforms, the government is now working towards endorsing and implementing a similar structural reform programme to enhance the competitiveness of the Egyptian economy at large while focusing on manufacturing and export-oriented activities, enhancing competition and providing more opportunities for the private sector, as well as working on enhancing the productivity of the labour force.
Maait also highlighted the policies that Egypt is implementing to achieve its primary objectives of attaining private-led, sustainable and inclusive growth, job creation, fiscal discipline and social justice.
These policies include continuing work to support a strong and sustained pick up in private investments and continuing to work on creating adequate productive jobs, in addition to enhancing human development and capacity through the direct financing of education reform programmes and programmes to improve health services.
The policies also include increasing the budget allocation for targeted social protection programmes to boost social justice and welfare and enhance the efficiency and effectiveness of social protection programmes and initiatives, while pushing ahead with much needed administrative reforms to improve public service delivery and the productivity of the government.
Moreover, the country is also working to address challenges faced by both domestic and international investors and securing reliable energy supplies.