These global crises have placed significant burdens, like rising inflation, on numerous countries, including Egypt, Belhaj said. He emphasized that confronting these repercussions “is not an easy matter” for Egypt despite its mighty efforts, as measures to address them have introduced challenges of their own, such as rising interest rates.
Al-Ahram: Egypt is encountering significant challenges caused by successive external crises, such as the COVID-19 pandemic and the conflict in Ukraine. What are some strategies to address the repercussions of these crises and bolster the economy?
Feried Belhaj: Undoubtedly, the impact of the COVID-19 crisis, including disruptions in supply chains, inflation and the ongoing Ukrainian war leading to shocks in food and energy prices, has had adverse consequences for the Egyptian economy. These challenges have exerted significant pressure on the Egyptian government and its economic reform plans, thereby reducing their effectiveness.
Consequently, there is a pressing need to adopt policies that foster economic growth by actively involving the private sector and strengthening the social safety net to ensure stability. Furthermore, addressing the current economic pressures requires heightened attention to the middle class, ensuring its members do not slip into poverty. It is worth noting that the Egyptian economy is not alone in facing these pressures, as most economies have experienced a weakened economic situation in the aftermath of the COVID-19 pandemic.
AA: Why did it take considerable time to finalize and announce the strategic partnership framework with Egypt? What are the primary characteristics and goals of this strategy?
FB: The strategy was not a lengthy process. However, extensive discussions were held with the Egyptian government to align [the partnership] with Egypt's goals and aspirations, and to establish a comprehensive vision for joint action in the coming five years. The strategy encompasses the period from 2023 to 2027.
Its structure considers the role of the state in the economy. Expanding the participation of the private sector is one of the most important goals that the strategy seeks to achieve. This goal is the main way out of the current crisis facing the economy and the way to achieve recovery and push growth rates to rise.
To achieve this objective, various policies need to be implemented to enhance the business environment, establish a stable legislative framework, encourage small and medium enterprises and enhance the overall competitiveness of the economy. These measures will contribute to increased production, create opportunities for exports, generate employment and specifically target youth employment.
Another significant objective of the strategy is to improve human capital outcomes, with a particular focus on enhancing healthcare services. The World Bank contributes to the financing of the comprehensive health insurance project; the bank also finances the education development project, which is a successful model and a pioneering project for education reform to be followed in several Arab countries.
The strategy also aims to support Egypt's transition towards a green economy and enhance environmental adaptation. Egypt's successful hosting of the UN Climate Change Conference (COP27) has paved the way for the adoption of new policies. The World Bank's Climate and Development Report highlights several challenges faced by Egypt in areas such as pollution and water management. It is imperative to support the implementation of measures and programmes to reduce pollution, improve water resource management and promote the shift towards renewable energy. Egypt has already announced projects focused on green hydrogen production and water desalination.
Additionally, the strategy seeks to enhance governance and transparency, particularly concerning government data and the budget. This transparency will enable the private sector to develop a clear vision of the economy's future, which will guide their investment decisions and plans.
AA: Amid the global crises, Egypt faces a foreign currency shortage and a financing gap. Is it possible to increase financing for Egypt?
FB: Egypt currently holds the largest financing portfolio in the region, valued at $7 billion, surpassing Morocco's portfolio valued at $5 billion. This portfolio represents the funds agreed upon through the new partnership strategy, including $5 billion from the World Bank, dedicated to financing development projects at a rate of $1 billion per year. Additionally, $2 billion in financing from the International Finance Corporation (IFC) of the World Bank Group is allocated to support the private sector.
While the World Bank Group actively supports Egypt's reform and growth efforts, the determination of the financing value for the partnership was based on dialogue with Egypt. If necessary, the financing amount can be increased to fund important projects. It can also contribute to stimulate additional financing from development partners or the private sector.
AA: Some rating institutions have lowered their view of the Egyptian economy. Does this affect the World Bank's financing?
FB: Credit ratings do not directly affect World Bank financing, but they are taken into account. This is evident in the launch of the new partnership framework with Egypt and the continuation of existing programmes and plans.
While there is continuous dialogue and interaction with the International Monetary Fund (IMF), it is important to note that the role of the World Bank is different. The World Bank focuses on supporting specific and studied development projects rather than providing general budgetary support, which is the role of the IMF.
AA: Can you share your perspective on the ongoing debate surrounding the role of the state in the economy?
FB: The role of the state in the economy has been a topic of discussion for years in many countries in the region.
I believe that this role should be to provide a framework and governance through setting regulations and legislation. However, the state should not extend its role to becoming a direct economic actor or contractor or the real producer. This role should be relinquished to the private sector.
Meanwhile, policies need to be adopted, including streamlining company establishment procedures, improving economic litigation procedures, enhancing judicial skills and ensuring the implementation of judgments. These measures instill confidence and momentum in the private sector.
AA: What is your opinion on the measures taken by the government to encourage private sector participation, such as the development and implementation of a state ownership policy document? What further actions can be undertaken to propel this initiative forward?
FB: The state ownership policy document announced by the Egyptian government aims to facilitate the participation of the private sector in the development process by offering certain public companies for sale. This demonstrates the government's commitment to increasing the involvement of the private sector. The sovereign fund plays a positive role and can open the door for private sector engagement, provided there is transparency. Other alternatives, such as offering shares in the money market or selling to strategic investors, can also be explored.
AA: How can efforts to enhance women's empowerment be further reinforced, considering it is a crucial priority within the programs of the World Bank?
FB: The role of women is one of the important axes in the new partnership framework with Egypt, across economic, social, and political spheres. There is no economy that walks with one foot. Despite women's high level of education, experience and skills, their role and position in the labour market is not yet at desired levels. Strengthening women's empowerment necessitates addressing crucial facilitating factors, such as ensuring accessible transportation options, establishing child care facilities, providing incentives that enable women to fulfill their roles and ensuring fair wages.