Ambitious development targets

Gamal Essam El-Din , Tuesday 28 May 2024

The socioeconomic development plan for the coming fiscal year is approved by the Senate, reports Gamal Essam El-Din

Ambitious development targets

 

On Sunday, the Senate approved the government’s 2024-25 socioeconomic development plan which targets economic growth of 4.2 per cent, up from an estimated 2.9 per cent in FY 2023-24. The increase will see Egypt’s GDP rise to LE17.3 trillion by the end of 2024-25 according to Planning and Economic Development Minister Hala Al-Said.

The plan targets overall investments of LE2.25 trillion, of which LE496 billion will be provided directly by the government to fund projects across Egypt. Total public investments, including government and other economic authority allocations, will not exceed LE1 trillion, a figure that Al-Said said reflects the government’s determination to push ahead with fiscal tightening and restrict foreign borrowing.

 “The Central Auditing Agency [CAA] will oversee government investments, guaranteeing their efficient implementation on the ground,” said Al-Said. The CAA will also ensure government investment prioritises industrial and agricultural production, IT services and the tourism and logistics sectors in a way that reinforces resilience against external economic shocks.

“We hope the investments will generate 900,000 new jobs and maintain the unemployment rate at seven per cent,” said Al-Said.

Under the plan, 42.4 per cent of public investments will go to human development projects, 25.4 per cent to water and sanitation projects, 8.4 per cent to construction, 7.1 per cent to transportation and storage, 3.8 per cent to energy projects, 3.6 per cent to communication and information technology, 3.1 to agricultural projects and 6.2 per cent to other sectors.

Human development funding will focus on implementing the second phase of the Decent Life presidential initiative. The cost of the first phase was initially estimated at LE80 billion but due to the devaluation and implementation obstacles the cost skyrocketed to LE360 billion.

“This will not discourage us from implementing the second phase which is expected to cost LE600-800 billion over four years,” said Al-Said.

The initiative seeks to improve living conditions in rural Egypt by constructing health units and schools and facilitating income-generating projects. FY2024-25 will see LE268 billion invested in education, health, and social services, accounting for 27 per cent of overall investments.

Private investments will increase to LE987 billion, up from an estimated LE560 billion, boosting the private sector’s contribution to the national economy to 48 per cent compared to 37 per cent estimated for 2023-24.

Senate approval of the socio-economic development plan followed a lengthy discussion of a report prepared by the chamber’s Economic and Financial Affairs Committee which warned that global economic crises triggered by the wars in Ukraine and Gaza will continue to impact the Egyptian economy in the coming year.

“Egypt will continue to suffer from imported inflation, high import bills and dwindling foreign exchange revenues,” said the report. It noted that Suez Canal revenues have shrunk by more than half following attacks on shipping in the Red Sea.

Recent government measures and IMF-inspired reforms, including adopting a flexible exchange rate, had helped stabilise the economic situation. “The $35 billion Ras Al-Hekma deal was a result of these reforms, but it has to be supported by other measures such as cutting imports, boosting industrial and agricultural exports and restricting foreign borrowing,” said the report.

The report expects net foreign direct investments to reach $30 billion and remittances from Egyptian workers abroad to reach $33 billion. It also forecasts a drop in inflation to 25 per cent by the end of 2024-25, down from 33.4 per cent in 2023-24.

The report recommends that the government target a 15 per cent increase in commodity exports and 10 per cent reduction in imports and underlined the need to attract $30 billion in foreign investments in 2024-25 to “shore up foreign exchange reserves and stabilise the Egyptian economy in the long run”.

The report also highlighted that the government should take measures to facilitate a reduction in population growth to 1.4 per cent next year, down from 1.6 per cent in 2022-23, in order to “cut poverty rates… and reduce pressure on the state treasury” and lauded government plans to increase the cultivation of wheat to 3.5 million feddans.

Head of the Senate’s Economic and Financial Affairs Committee Hani Sarieddin lamented that the transport sector is allocated more funds than health, education, and social services. This, said Sarieddin, shows that the government is still prioritising infrastructure projects.

Sarieddin criticised the slow pace of implementation of universal health insurance. It has taken six years to toll out the system in five governorates. He also recommended that more funding be allocated to developing renewable energy.


* A version of this article appears in print in the 30 May, 2024 edition of Al-Ahram Weekly

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