“In countries where currency devaluations occur and inflation is high, it's hard to really track real growth because as inflation goes up the poor shoulder more and more burdens as they can't keep up with the rising prices”, the President of the World Bank Group (WBG) David Malpass told Ahram Online.
Malpass’ remarks came in response to a question by Ahram Online on his perception of recent economic developments in Egypt amid the ongoing global economic crisis.
He also noted that these circumstances create real challenges, adding that both the WBG and the IMF have worked closely with Egypt over the years to develop a program that would be more robust in terms of the private sector in the country.
Malpass also highlighted that the local currency depreciation has affected the real GDP growth of a number of countries, including Egypt. He added that this is a general problem in countries where debt is denominated in US dollars and where currencies weaken. These circumstances make both the debt burden and the debt service burden even more costly for the people of the country, according to Malpass.
Ahram Online also asked Malpass about his perception of Egypt’s recent efforts to raise the private sector’s share in the local economic activity.
“We've encouraged the level playing field between state-owned industries and the private sector. This would then open the doors not only to more investments but to more innovative investments and would help the country navigate the ongoing challenges”, Malpass told Ahram Online.
He added that it was very important for developing countries, including Egypt, to establish a macro framework through which fiscal, monetary and currency policies all work to create stability.
Malpass also said that “the advanced economies are slowing down and not sharing very much in terms of capital with the developing countries. So, developing countries will have to adjust their economies to make the best out of the limited resources available through fiscal discipline.”
The WBG’s Board of Executive Directors approved in March a new Country Partnership Framework (CPF) for Egypt, with finances amounting to $7 billion for FY2023–2027.
The World Bank has revised down its forecasts for Egypt’s real GDP growth in FY2022/2023 and FY2023/2024 to four percent in each of these two fiscal years, down from 4.5 percent it projected in December of 2022.
It also said that fiscal pressures and the valuation effect resulting from the devaluation of the Egyptian pound are projected to drive the country’s debt-to-GDP ratio to 95.5 percent by the end of current FY2022/2023, up from 88.3 percent a year earlier.