INTERVIEW: Richard Montgomery, UK executive director of WB says Egypt’s economy achieved significant progress, curbing inflation and deficit

Doaa A.Moneim , Thursday 23 Jan 2020

In January, Montgomery and a high-level delegation of WB executive directors visited Egypt for the first visit since 2014 to discuss Egypt’s economic programme and to meet with Egyptian top officials

World Bank

In an interview with Richard Montgomery, UK executive director of the World Bank and spokesperson of a high-level delegation of World Bank executive directors that visited Cairo in January, talked about the delegation's opinion regarding Egypt’s achievements under the economic reform programme, and how they asses reform procedures.

What is your assessment of the procedures and subsequent results of Egypt's economic reform programme?

The executive directors reviewed Egypt’s macro-economic indicators and see a great deal of progress made by the present government. The economy was stabilised, the deficit reduced, reserves have increased, and after an initial spike inflation price rises have significantly reduced.

 Actually, two examples of achievements suggesting positive results on the ground stand out. Tthe government has phased out regressive fuel subsidies. These were increasingly unaffordable and became an inefficient use of public money. The procedures to phase them out provide lessons for other countries.

On the other hand, the government redirected public money to expand social programmes benefiting the poorer sections of society. The Takaful and Karama programme has become a flagship social safety net In design and implementation. In addition, social housing programmes are operating at an increasing scale.

Egypt’s GPD rises significantly

How do you evaluate the performance of Egypt’s macroeconomic signs?

GDP growth has risen very significantly to 5.6 percent, which is a major achievement in a wider global economy with anemic growth rates.

How can the downsides of the economic reform programme, that took their toll on the Egyptians, particularly the middle class, be addressed for this class to regain its strength and increase its contributions to the economy and its purchasing power?

Creating more and better jobs is a key priority for the next phase of Egypt’s reforms. This was a priority recognised in many of the conversations we had during our visit, with President Abdel-Fattah El-Sisi, the Prime Minister Mostafa Madbouly and other ministers.

Challenges ahead

What are the challenges that Egypt’s business and investment climate is facing that could curb its economic reform efforts?

Creating better conditions for the macro-economic environment is the first step, such as bringing inflation and interest rates to manageable levels, which has been achieved.

Reforming laws and regulations to reduce the costs of doing business is a further priority. Some progress has been made on these issues, but there is more that could be done.

 Also, the government, the private sector and development partners need to work together to attract more investment in different areas of the economy.

The World Bank Group is presently doing more analytical work on these issues, and hopes to identify key sectors with the potential to create more jobs. Such analysis will help show how improvements to business conditions in specific sectors will help attract more investment and growth.

World Bank's lending portfolio in Egypt hits $8 billion

Cooperation between the World Bank and Egypt has been ongoing for many years and has recently witnessed a significant increase through several financing programmes. What are the features of joint work in the coming period and the most important programmes that will be implemented?

Yes, the World Bank has grown its work in Egypt substantially since 2015, when it agreed a Country Partnership Framework (2015-2019) with the government to support its first wave of reforms. It now has a lending portfolio of $8 billion across 14 major projects and financing agreements.

The World Bank team in Cairo is at an early stage of discussing with the government a new Country Partnership Framework which will be developed over the next five years to support the government’s second wave of reforms now underway. This new framework hopes to agree how the World Bank Group can best support job creation and ensure Egypt’s growth is inclusive, enabling better incomes for people in all income groups across society.

Private sector has more to do

The private sector needs great efforts to increase its participation in the economy and generate job opportunities. What is the role of the World Bank in enhancing the efforts of this sector and increasing its role in economic development?

The World Bank agrees with the sectors identified, but needs to ensure its financing helps attract rather than substitutes for private sector investment. The private sector diagnostic underway by the World Bank’s private sector arm (the International Finance Corporation) will help define the role it might take in different sectors.

Investment in human capital is a top priority for Egypt in the current phase, especially in the education and health sectors. How can these efforts be supported with the launch of the comprehensive health insurance scheme and the education development programme?

The World Bank is very aware of the strong leadership being shown by the government of Egypt in these areas, and we are looking at how best we can support the reforms in the coming framework period. A major focus needs to be on the quality of services and education in the coming years.

The World Bank has a Human Capital project which is comparing progress across countries and sharing lessons on how to make more progress.

What is the most important global effort on the environment and the latest World Bank programme in this area? And, what are the most important developments in Green Bonds and the extent of global demand for them?

The biggest global environmental challenge is to transition to lower carbon growth, by reducing over time fossil fuel use and emissions. The World Bank Group is the largest single development financier of green growth programmes.

Green Finance, and the use of Green Bonds, is increasing. Many countries have issued such bonds, though the market is still nascent. I understand the government of Egypt is considering such Green Bonds in the coming year.

Modern technology reflects on the size of jobs in the future and will lead to the disappearance of some of them with increasing unemployment rates. How can this challenge be met?

The World Bank has done a lot of analytical work on this issue. Overall, the potential is positive.

For instance, Sub-Saharan countries may benefit from digital technology adoption in different ways than other regions.

As our recent report issued in July coped with such a point, the region has an opportunity to forge a different path from the rest of the world, if digital technologies are harnessed correctly by governments and businesses by ensuring that critical policies and investments are in place.

For Africa, to take advantage of these opportunities, there are several fundamental public policy recommendations for governments to consider, including ensuring that digital infrastructure is available and affordable to all in rural and urban areas, and across all demographics, providing complementary physical infrastructure such as reliable electricity, supporting the inventors and entrepreneurs that are needed to develop tools both for lifting the skills of workers in their current occupations and for the new tasks that the adoption of new technologies will enable.

Moreover, Africa needs to develop interventions to facilitate the productivity upgrading of informal farms and firms, upgrade the skills of their workers, and expand the coverage of social protection and labour systems, especially to workers, to spur greater entrepreneurial and worker risk-taking, and to facilitate worker transitions between jobs.

There will be some people who may lose , and we need to be careful about manufacturing industries which may face automation in the future. Any transition to new technology needs to be managed, and people affected negatively need support. But, overall, new technology will create more opportunities.

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