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Egypt PM unveils ambitious programme to revive economy

Sherif Ismail presented to parliament Sunday an ambition government plan to halt and turn around Egypt's deteriorating economic profile

Ahram Online , Sunday 27 Mar 2016
Sherif Ismail
Egypt's PM Sherif Ismail (Reuters)
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Egypt is targeting an economic growth rate of 5-6 percent by the end of the 2017/18 fiscal year, and north of six percent in the following years, Prime Minister Sherif Ismail told Egypt’s parliament Sunday while unveiling an ambitious three-year plan.

After years of political turmoil and instability, the most populous Arab nation is in great need of private investment, particularly foreign currency inflows, to ease the burden on a strained state budget and to address a hard currency crunch that has slowed economic activity.

In January, the World Bank revised its forecast for Egypt's economic growth to 3.8 percent the current fiscal year, from 4.5 percent predicted in June 2015, citing the shortage of foreign currency, but the bank expected growth to pick up in later years, driven by investment.

Ismail said the government is faced with “difficult decisions” in implementing a plan that he qualified as “ambitious” numerous times in his speech to Egypt’s House of Representatives.

Among the tough steps is reforming Egypt’s state subsidies programme, which added to wages and servicing public debt consumes 80 percent of the state budget, said the prime minister.

The prime minister also reiterated his government’s keenness to facilitate investment procedures, such as obtaining licenses and permits, and land allocation.

Budget deficit 

The government plans to cut the budget deficit to 9-10 percent of GDP by the end of FY17/18, compared to the current 11.5 percent, and to 8-9 percent by the end of fiscal year 2019/2020, said Ismail.

The prime minister also reiterated the government’s intention to introduce a value added tax (VAT), which Central Bank of Egypt Governor Tarek Amer said was necessary for Egypt to receive the first $1 billion tranche of a $3 billion World Bank loan it signed last December.

Public debt will be reduced to 92-94 percent of GDP by end FY17/18, from 93 percent currently, according to Ismail, and to 85-90 percent of GDP by end FY19/20, said the prime minister.

Egypt expects $15 to $20 billion in foreign investment in government debt notes this year, after a dramatic hike in interest rates pushed yields on treasury bills and bonds significantly higher this month, Amer said in a televised interview Saturday evening.

The rate hike aims to address inflationary pressures after the sharp devaluation of the Egyptian pound by 14.5 percent against the US dollar 14 March, which was hailed by global credit agencies Moody’s and Fitch as “credit positive,” though likely to fuel higher inflation.

The government's programme also aims to address the country's trade deficit by boosting the competitiveness of Egyptian exports and controlling imports, said Ismail, to reduce the trade deficit by 3-5 percent by the end of FY2017/18.

Egypt has in recent months prioritised essential goods and production inputs in making hard currency available to importers, raising customs on hundreds of "luxury" imports and introducing new registration requirements for suppliers of dozens of imported consumer goods with the aim of slashing the imports bill by a quarter this year.

The government also plans to bring the unemployment rate, which stands at 12.7 percent, down to 10-11 percent by the end of FY17/18, and less than nine percent by the end of FY19/20.

 

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Sam Enslow
28-03-2016 08:37am
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Reality?
Bonds yield high interest rates because of fears of further devaluation of the pound. When the pound reaches 10 to the dollar, the interest will be lost, the investor will be about even. Human rights and eliminating corruption are not incidental to attracting foreign investors in other than isolated petroleum/gas projects. The bureaucracy must be reformed and performance - not age or patronage - made the key to advancement. Nasser made the error of valuing 'loyality' over ability. The international investment community is not stupid. Before investing, the see for themselves what is happening. Tourists come when they feel welcome and well treated as well as safe. The reforms needed in Egypt would cost little but they must be done before investment will come. It seems state institutions are more interested in protecting 'this thing of ours' more than in advancing Egypt as a whole. What is the saying, 'Egyptians look at their feet.'? When Team Egypt is a reality, it will win.
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Sherif Shehata
28-03-2016 01:47am
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SHOW us ACTIONS.
The key question is how much all Ministers cost Egypt a year and what they have been done to Egypt so far in the end of a year? This is first step to build Egypt economic and cut down corruption. All we need to be honest and do our jobs right. God save Egypt.
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Al,Masri
27-03-2016 08:14pm
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Without drastic measures ...
Just dreaming up numbers won't solve the economic collapse. Egypt has reached a level of economic disaster nothing short of drastic measures would suffice. What kind of drastic measures? (1) population freeze. (2) Military spending freeze. (3) import freeze. (4) compulsory national service for all Egyptians under 30 to farm the land (including army and police). (5) Zero tax on new investment and new business star-ups by Egyptians and foreigners for 10 years.
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