News of the upcoming sale of stakes in state-owned companies was all over the news on Monday this week, when Asharq Business reported that the government would be selling a minority stake in telecoms company Telecom Egypt (TE).
Experts have said the sale will likely be to a Gulf sovereign fund. The government owns 80 per cent of TE, while the remaining shares are traded on the Egyptian Stock Exchange (EGX).
Also on Monday, Ayman Suleiman, CEO of the Sovereign Fund of Egypt (SFE), told CNBC Arabia that the fund’s pre-Initial Public Offering Fund (IPO) would next month offer stakes in two to three state-owned companies to strategic investors or via public share sales.
He also said that the government would soon announce the sale of stakes in seven hotels that have been merged into a single company.
The government has lined up 32 companies in which stakes will be sold. The move is part of efforts to increase the footprint of the private sector in the economy, one of the points the government has committed itself to as part of its agreement with the International Monetary Fund (IMF).
It is also a means to bring in much-needed hard currency. The sale of stakes in state-owned companies will bring in as much as $6 billion, Planning Minister and SFE Chair Hala Al-Said told Asharq Bloomberg in September.
The hard currency will be very welcome, especially amid reports of foreign-exchange shortages and further depreciations of the value of the pound in the parallel market. The banking group Société Générale said the pound could lose another 10 per cent of its value by the end of the current quarter, Bloomberg reported in late February.
Further depreciation of the pound will mean higher inflation, which reached a five-year high of around 26 per cent in January. The inflation figures for February are due on Friday, with rates not likely to cool anytime soon, especially with the new hikes in fuel prices announced last week.
In a bid to mitigate the impact of soaring inflation on purchasing power and improve the quality of life for most Egyptians, President Abdel-Fattah Al-Sisi has announced a new package of wage and pension hikes during his visit to Minya governorate on 2 March. As of 1 April, all government employees will receive a minimum of a LE1,000 increase to their monthly salaries, while pensioners will receive a 15 per cent increase in their payouts.
“The war in Ukraine, which is in fact an economic war between the East and West, has given rise to very negative economic effects that have hit most countries hard, including Egypt,” Al-Sisi said.
It has seriously disrupted world supply chains and pushed inflation to unprecedented rates. However, thanks to the economic reforms Egypt has adopted since 2016, the country has been largely able to absorb the shocks of the current global crisis triggered by the war in Ukraine and extend social-protection measures to the needy and limited-income classes, Al-Sisi said.
He said the state was taking serious measures to help contain the current economic crisis, including by localising industries, reducing imports, expanding food-security programmes, and attracting greater direct foreign investments.
“We have been facing a decade of challenges, crises, terrorist attacks, and hostile media campaigns, but we have been able to overcome them all, move forward, and even achieve gains,” Al-Sisi said, adding that Egypt would also overcome the current crisis.
“The state and the government are doing their best to mitigate the difficult economic impacts on citizens,” he added.
However, he warned that malignant forces were trying to exploit the current difficult economic conditions in order to push Egyptians to lose confidence in themselves and their political leadership.
Finance Minister Mohamed Maait said in a statement on 4 March that the new package of wage and pension hikes and social-protection measures would cost the government an initial amount of LE150 billion.
“This figure will cover the last quarter of the current fiscal year [April to June] and the new 2023-24 fiscal year,” Maait said.
He said that the fiscal discipline and austerity measures and the rearrangement of priorities adopted by the Finance Ministry to rationalise public spending and boost revenues had made the budget flexible enough to absorb global shocks and meet the needs of the vulnerable classes.
“The Egyptian economy has so far proved resilient in the face of the global economic crises that have hit most of the world’s countries,” he said.
Chair of the parliament’s Budget Committee Fakhri Al-Fiqi indicated that an estimated 35 million citizens would benefit from Al-Sisi’s new social-protection measures. “Most of these citizens belong to the limited and average-income classes and are in desperate need of wage and pension hikes in order to be able to bear the high cost of living,” he said.
Some 4.5 million government employees would be able to take advantage of the new initiative, with their families numbering 22 to 25 million citizens. Between 10 and 11 million retired people would also see their pensions increase by 15 per cent, he said.
The beneficiaries of the social-support programmes Takaful and Karama will see a 25 per cent rise in cash transfers as of 1 April, costing a total amount of LE6.5 billion.
“This initiative comes at the right time to contain any public discontent that might arise due to the new increase in fuel prices,” Mustafa Salem, deputy chair of parliament’s Budget Committee, said.
He said that the government had maintained diesel prices unchanged at LE7.25 per litre to protect the poor and limited-income classes who widely use this kind of fuel, while also continuing to charge bakeries and food producers that use mazut (fuel oil) LE4,200 per ton to prevent any further increase in bread and food prices.
Salem said that Al-Sisi’s new social-support programme was not only the result of inflationary waves triggered by the war in Ukraine. “It is also a direct result of the devaluation of the Egyptian pound in line with the $3 billion loan agreement with the IMF last October, which pushed inflation rates to hit a record of 25.8 per cent in January, up from 21.3 per cent in December, and driven largely by expensive food imports,” he said.
“This is the highest level of inflation since 2017.”
He warned that any further devaluation of the Egyptian pound would push inflation rates higher and make the cost of living more difficult for millions of citizens. “There is no question that the impact of the devaluation of the Egyptian pound on the country’s imports bill is putting financial pressure on the public,” Salem said.
“When the Finance Ministry presents the new draft 2023-24 financial year budget, we will be able to know how quickly it will be able to get over the crisis,” he concluded.
* A version of this article appears in print in the 9 March, 2023 edition of Al-Ahram Weekly