Minister Ashraf Salman (Photo: Al-Ahram)
Egypt will need private sector investments of at least LE200 billion ($28.57 billion) if it is to achieve its growth target of 3.5 percent by the end of the current fiscal year, investment minister Ashraf Salman said on Monday.
Political turmoil had caused growth to slow to 2.3 percent of GDP in the first nine months of the past fiscal year, as the country grappled with the aftermath of a popular uprising which led to the removal of former Islamist president Mohamed Morsi by the military.
GDP is now estimated to have reached 3.5 percent in the last quarter, ending in June 2014.
Speaking at the Al Mal GTM conference on managing Egypt's balance of trade, Salman said that public investments could only make up LE58 billion ($8.3 billion) out of the LE260-LE336 billion ($37.1 - $48 billion) in investments required to achieve this year's target growth rate, meaning a greater role for the private sector.
Egypt has undertaken a series of contractionary reform measures in recent months, cutting state subsidies and reforming the tax system to widen its tax base and maximise revenue to shrink the budget deficit from 14 to 10 percent of GDP by the end of the fiscal year ending June 2015.
Earlier in July, Egypt moved to cut state fuel subsidies by LE44 billion ($6.3 billion) by raising the prices of fuels by up to 78 percent, in addition to raising electricity prices and introducing a spate of new taxes.
The resulting restrictions on government spending creates the need to liberalise the economy and resort to the private sector to reach targeted growth rates.
"Knowing that these reforms follow a contractionary fiscal policy, stimulating the economy has to be done through partnership with the private sector," says Salman.
In the longer term, Egypt's government is targeting 5.7 percent growth in fiscal year 2017/18, said Salman.
"There are three aspects to the government’s socioeconomic programme: structural reform, a stimulus development plan and infrastructure,” said Salman.
Much-anticipated legal reforms governing investments, labour, industry and bankruptcy will be accomplished by the end of the current fiscal year, while other aspects of the socioeconomic programme will take four years, according to Salman.
The government aims to reduce the poverty rate to 19.9 percent – from more than 26.3 percent in FY 2013/14 – and cut the unemployment rate to 9.5 percent – from 14.6 percent in FY 2013/14 – by June 2018, said Salman.
Following three years of political upheaval, President Abdel-Fattah El-Sisi was elected in July for four years on a promise to achieve political stability and economic development.