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The Pyramids weren’t built in a day

Georgina Merhom assesses progress on Egypt’s Vision 2030 sustainable development strategy

Georgina Merhom , Wednesday 15 Aug 2018
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I remember waking up in panic on 25 January 2011 thinking I had overslept and missed the school bus.

To my pleasant surprise, school was cancelled that day amid eventually confirmed rumours of a revolution. For the rest of the day, my family and I were glued to the television, watching in astonishment as chaos unfolded in Tahrir Square.

An eager and confused 14-year-old me was asking question after question, the most important being “why”.

Why had millions of Egyptians put their lives on hold and neglected their commitments not for a day or two but for 18 days? Why had entire communities come together in a life-threatening battle against corruption and inequality?

To some, the answer was simple, “for bread and salt”. For others like myself, it was more complicated and not so easily explained: because loving one’s country is not always about acquiescing in its shortcomings or “seeing a glass half full”.

Instead, it is about collectively taking responsibility for our nation’s future, even when it comes at the cost of our individual short-term security.

It is about deciding that we can no longer accept the negligence and damage that decades of corrupt government policy have perpetrated on the most vulnerable amongst us.

But what does that exhortation mean? It means, as President Abdel-Fattah Al-Sisi told the media in 2014 when announcing that he would seek office as president, that “we Egyptians face an extremely difficult task and a high-cost mission.”

Perhaps the phrase “high-cost mission” was meant to foreshadow his strategy for sustainable development and his vision for Egypt 2030.

Egypt 2030 expresses the desire of the protesters in Tahrir Square to live in a country where no one is too poor to access bread and salt, clean water, education and healthcare and one where anyone is able to create a destiny based on personal merit and regardless of socio-economic background.

This ambitious strategy focuses on 12 pillars, and while all of them are interdependent and crucial for Egypt’s sustainable development, I will concentrate here on one of them that has sparked contentious debate: economic reform.

Economic reform has seemingly been an even more contentious issue than counter-terrorism and reasonably so: it is easy to be pessimistic and disregard the bigger picture when daily life is becoming increasingly difficult.

Without question, the recent period has been painful; however, what many people seem to overlook is that the required policies were obvious and implementing them was inevitable, whether in 2016 or 10 years from now.

Postponing reform would have been a band-aid solution that would only have exacerbated the economic damage that needed to be reversed.

As part of its commitment to its economic reform strategy, Egypt has implemented monetary policies that meet the conditions for lending from the International Monetary Fund (IMF) and adjusted its fiscal policy to invest in strengthening growth and job creation. It has also initiated structural reforms aimed at encouraging private-sector development.

First, a deflationary monetary policy was introduced to increase the country’s foreign-currency reserves and promote an endogenous interest rate path to manage long-term inflation expectations.

Such policy decisions have included devaluing the Egyptian pound against the US dollar, introducing a value-added tax (VAT), and removing energy subsidies in order to reduce the national budget deficit and cover the cost of a $12 billion loan from the IMF.

Second, Egypt’s fiscal policy has encouraged investment that enhances productivity and reduce unemployment.

Investment projects undertaken include the New Administrative Capital that plans to provide 1,705,000 jobs as well as 91 square km of energy farms, and a $15 billion investment deal with China on projects in the electricity, transport and infrastructure sectors.

Third, Egypt’s structural reforms have focused on unleashing the potential of the country’s domestic economy.

In 2017, investment laws were enacted that offer foreign investors incentives including tax-breaks and rebates. Egypt also enacted new companies and bankruptcy laws that make the legislative framework more conducive to growth.

As a result of this economic reform strategy, Egypt’s real GDP has grown, and inflation has diminished. Employment has declined, and the budget deficit has fallen.

Results

The IMF has noted that Egypt’s GDP grew by 4.2 per cent in the fiscal year ending in June 2017, up from 3.5 per cent in 2016.

Preliminary estimates suggest that the country’s GDP grew by 4.9 per cent in the 2018 fiscal year, and the IMF projects six per cent medium-term growth.

Moreover, the Central Bank of Egypt (CBE) annual report for the 2016-2017 fiscal year shows inflation rates to have declined.

The annual headline and core inflation rates retreated for the sixth consecutive month to record 17.1 per cent and 14.4 per cent, respectively, in January 2018 after peaking in July 2017 at 33 per cent and 35.3 per cent.

Unemployment in the first quarter of 2018 fell from 11.3 per cent in the fourth quarter of 2017 to 10.6 per cent.

As far as the current account is concerned, the IMF notes that “Egypt has trimmed its budget deficit, rebuilt foreign-exchange reserves, and attracted higher tourism revenues and remittances.”

A presidential spokesperson has affirmed that the government is expected to reduce the total budget deficit to 9.5 to 9.7 per cent of GDP in the current fiscal year compared to 10.9 per cent of GDP in the previous year.

There have also been increasing revenues, with agricultural exports rising by 13 per cent between September 2017 and April 2018 to reach 3.165 million tons, up from 2.802 million tons during the same period last year.

Non-petroleum industrial exports have increased by 11 per cent from $13.5 billion to $15 billion in 2017. Aided by cheaper prices and improved security, tourism is recovering nationwide. In 2017, tourism revenues rose by 123.5 per cent over 2016 to $7.6 billion.

If Egypt’s development strategy has already delivered promising results, why has it sparked such contentious national debate?

The answer is that macro-scale development based on long-term growth has made progress seem abstract and intangible and that many Egyptians may feel sidelined despite hearing of new investment projects, international partnerships, and progress in gender parity because their focus is on whether policy rewards them now rather than its impact on the entire country and future generations.

Perhaps it is only the privileged few who can afford to step back and see the bigger picture as opposed to those whose lives are governed by the need to secure their next meal.

Nonetheless, it took our ancestors 100 years to build the Pyramids; it took determination, the mobilisation of millions, and one common vision to leave behind a timeless legacy that tells our nation’s story to the world.

The question is what comes next. How can we commit to sustainable long-term development while managing a short-term crisis? How can we implement grassroots initiatives, not only to support macro development, but also to demonstrate to every citizen that results are attainable? What collateral damage surrounds this “high-cost mission” and how can we diminish its effects?

These are questions that policy alone cannot answer. The Egypt 2030 strategy reflects a duty to build a legacy that can inspire future generations to continuously strive for better, to make personal sacrifices for the greater good, to view crises as opportunities to be innovative and find alternative solutions to the questions that policy alone cannot answer, and to challenge narratives based on incomplete knowledge, polarising politics and conspiracy theories.

* The author conducts macroeconomic research on the G7 and G20 countries and is an Egyptian youth ambassador to the United Nations and a junior fellow at NATO.

*A version of this article appears in print in the 16 August 2018 edition of Al-Ahram Weekly under the headline: The Pyramids weren’t built in a day  

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