Egypt cannot afford to postpone tough economic reforms: Sisi

Ahram Online , Tuesday 23 Aug 2016

Egypt's President Abdel Fattah El-Sisi (Reuters)

There is no time to postpone economic reforms that should have been put in place years ago, Egypt's President Abdel-Fattah El-Sisi said in a lengthy, three-part interview with the editors in chief of Egypt's state-owned newspapers.

"The fighter does not fight alone; his support system – the people – should fight with him. He will continue fighting as long as his people support him, and if they let go, he will not be able to fight," El-Sisi said in part two of the interview, where he spoke about domestic affairs, his economic vision, and harsh economic measures set to be put in place.

The first part of the interview, published on Monday, tackled Egypt’s international relations as well as regional developments in the Middle East, while the third part, set to be published on Tuesday, will involve a discussion on freedoms, human rights, and an expected presidential pardon for 300 detainees in the coming days.

Economic reform

El-Sisi said that in the past, necessary economic reforms were partially implemented, but that the country’s current economic situation would not allow for such an approach.

"We do not want the measures for reform to be more difficult if adopted later," he said.

This is not the first time El-Sisi has stressed on the inevitability of the "tough" measures that need to be adopted to deal with the crippling economic conditions facing the country.

El-Sisi said two weeks ago that "all the tough decisions that [previous leaders] have hesitated to take over the past years… I will not hesitate for a second to take."

On 11 August, the International Monetary Fund (IMF) announced that it had reached a preliminary financing accord with Egypt, though it still needs to be approved by the fund's executive board, which is expected to consider the request in the coming weeks.

El-Sisi said that there needs to be a distinction between Egypt’s economic reform programme and the IMF accord, elaborating that it was not acceptable for Egypt to have a "guardian" that dictates how the country should go about improving its economic situation.

Minister of finance Amr El-Garhy had previously said that the government has implemented a reform programme since 2014 that include curbing a huge budget deficit (ranging between 11 and 13 percent over the past six years) and growing public debt, stimulating growth and creating more jobs to alleviate unemployment and poverty rates and increase national income.

Head of IMF mission to Egypt Chris Jarvis hailed the measures and said the reform programme "aims to improve the functioning of the foreign exchange markets, bring down the budget deficit and government debt, and to raise growth and create jobs, especially for women and young people. It also aims to strengthen the social safety net to protect the vulnerable during the process of adjustment."

"What happened with the IMF is a normal procedure that takes place worldwide. We presented our programme and they had nothing to add to it. We are able to put forward a program and determine the difficult measures we should take. The complexities of the current economic situation are not absent from us. The issue is whether we want to undertake measures of reform or not. Do we want reform or not?"

An IMF delegation had visited Egypt to discuss supporting the country’s economic reforms through a three-year extended fund facility (EFF) programme worth some $12 billion (SDR 8.5966 billion, or 422 percent of Egypt's quota).

El-Sisi spoke about domestic debt rising from EGP 800 billion to EGP 2.3 trillion, or a rate of 97 percent of GDP. In a previous speech, he said that this was due to salaries rising from EGP 80 billion annually before the 2011 revolution to EGP 228 billion after the uprising.

"We want to limit the budget deficit and increase our resources in agriculture and industry, as well as attract investments. The general atmosphere is suitable in terms of providing infrastructure," El-Sisi said.

Electricity tariffs

El-Sisi defended the new tariffs for household consumers as part of the government’s plan to phase out energy subsidies, saying that the subsidy has not been lifted for 30 million people, except for those whose consumption exceed 1,000 KW-h.

"There was a suggestion that all subsidies on the first three brackets [consumption from zero to 350 KW-h] be lifted and be endured on the rest of the consumers of the other brackets, but this suggestion was refused because it would create a burden on the middle class," El-Sisi said.

He added that following the introduction of the new tariffs, he instructed his aides to present a report on increases in home electricity bills.

In August, Egypt's electricity minister Mohamed Shaker introduced new monthly tariffs for household brackets, with a first tile witnessing the highest increase, representing more than 46 percent, though it will still be the most subsidised, according to the minister.

Social security measures

El-Sisi said that the government is currently studying the possibility of undertaking measures to establish a balance between social classes and reduce strains on middle class and low-income citizens. 

The measures include a "Takaful and Karama" pension, which half-a-million families are already benefiting from. Those receiving the pension would increase to one million families in December and 1.5 million in 2017.

According to El-Sisi, the minimum pension was raised from EGP 200 - 300 to EGP 500, with an annual raise of a minimum EGP 125.

A third measure would be a continuation of social insurance pensions, which offer non-conditional aid to the poor, orphans, widows and female workers. This is expected to include 2.5 million benefiters with a cost of EGP 7 billion.

El-Sisi also promised to study more steps to improve the status of the poor and low income citizens.

"The medicine's taste is bitter, and suitable solutions should be taken – even if temporarily painful," El-Sisi said.

The president also denied rumours suggesting that one million civil servants were to be laid off.

Social equality

When asked whether there were fears that spending would negatively affect steps related to achieving “social equality,” the El-Sisi said that the state will be building one million apartments over two years at a cost of EGP 170 billion.

"We had previously said that anyone who submits a request for an apartment will get it," he said.

In a speech two weeks ago, El-Sisi said that by mid-2018, four to five million Egyptians would be living in 800,000 to one million residential units provided by the government.

He added that 175,000 housing units are currently being built at a cost of EGP 17 billion for one million families currently living in "unsafe informal settlements."

El-Sisi also said that 2018 would see the end of such informal settlements, promising housing for an additional 850,000 to one million Egyptians as part of a separate project to build 150,000 residential units.

El-Sisi also discussed a project that aims to combat Hepatitis C and reduce rates of infection to come in line with international rates.

As of May 2015, around 15 million Egyptians had been diagnosed with Hepatitis C, according to the World Health Organisation (WHO).

El-Sisi said that some 800,000 people have already received treatment and have been cured.

"We hope that we can announce by 2018 that Egypt has become Hepatitis C-free," he said.

New cities

El-Sisi said that the new cities currently under construction in several parts of the country – including the new administrative capital, El-Alamein, New Ismailia, and New Suez – aim to offer a "breather for the masses."

On the new administrative capital, located 45 kilometres east of Cairo, he said that the main aim behind the project is to decrease growing pressures on Cairo, where governmental facilities, business districts and foreign embassies are located.

"This way we can transform land in the desert that is worth nothing to land worth EGP 1,000 per metre," El-Sisi said.

Construction is ongoing at the new administrative capital, which was announced in March 2015 and is estimated to cost $45 billion.

Since then, several memorandums of understanding have been signed, including one with China, to aid in the project.

The megaproject's first phase will include the building of facilities for 12 ministries and a number of other governmental institutions, a residential area to include more than 25,000 housing units, and the world's largest park.

The army’s role

El-Sisi talked about the role of the army's Engineering Authority, saying that one of the army’s responsibilities is to administer the work of public and private construction firms.

He said that the Engineering Authority is in charge of managing and supervising construction projects, ensuring they are completed within their deadlines and at the lowest costs.

"There are 2,000 companies – private and public sector companies – working on projects under the supervision of the Armed Forces," El-Sisi said.

He added that Egyptians should not forget the role of the Armed Forces in controlling market prices through its "specialised bodies" that export meat and poultry at the lowest prices to combat price hikes.

The army has provided trucks over the past few years to transport consumer goods, ensuring they are sold at suitable prices and eliminating price hikes.

El-Sisi added that expenditure on the Armed Forces from the state's budget ranges from 2 to 2.5 percent of the GNP, saying that this is the lowest among countries in the region.

Egypt's state budget for the fiscal year forecasts total expenditure of EGP 936 billion and revenues to reach EGP 631 billion, according the finance ministry's website.

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