Cautious borrowing

Gamal Essam El-Din , Tuesday 6 Jun 2023

The Senate approved the FY 2023-24 socioeconomic development plan amid calls for limits on foreign loans, reports Gamal Essam El-Din

Cautious borrowing


The Senate gave final approval to the government’s fiscal year (FY) 2023-24 socioeconomic development plan in a vote on Monday. The vote followed two days of debates during which Planning Minister Hala Al-Said gave a run-down of key aspects of the plan for the coming fiscal year.

The government’s FY 2023-24 plan is based on LE1.65 trillion in investment, LE1.05 trillion of which (64 per cent) will come from the government and LE600 billion (36 per cent) from the private sector, said Al-Said. The government aims to increase private investments to 50 per cent by the end of FY 2025-26 and oversee a reduction in public investment from 71 per cent in FY 2021-22 to FY 50 per cent by FY 2025-26.

Al-Said said the new socioeconomic development plan has three objectives: to finish existing investment projects that are more than 70 per cent complete; initiate projects, particularly in the health and education sectors, already planned as part of the Decent Life initiative in rural Egypt, and exit projects that will be funded by the private sector in line with the State Ownership Policy Document.

The plan targets economic growth of 4.1 per cent, a reduction from the previously projected five per cent, in line with revised IMF and World Bank forecasts which expect Egypt’s growth rate to be between four and 4.3 per cent for FY 2022-23 to FY 2023-24.

“Though the 4.1 per cent growth rate is less than the previously expected five per cent due to the negative impact economic impacts of the war in Ukraine, it higher than that in many other countries,” said Al-Said.

“In FY 2023-24, we expect the communication sector to lead growth at 16.8 per cent, followed by the hospitality sector at 12 per cent, the Suez Canal at 11.9 per cent, construction at 6 per cent, health services at 5.2 per cent, and education services at 5.1 per cent.”

Under the plan, Al-Said said the electricity and renewable energy sector which will receive LE 81.4 billion worth investments in FY 2023-24, LE 69.4 billion of which (85 per cent) will come from the public sector and that “by the end of 2024, these investments will raise total generated electric power to 228 billion kw per hour and increase the contribution of renewables to total generated electric power to 11.8 per cent, up from 8.8 per cent in FY 2018-19.”

The plan also supports social safety programmes. The initial value of investments to implement the second stage of the Decent Life initiative in rural Egypt will reach LE30 billion, which will be used to set up 620 water and sanitary drainage projects, 3,000 school classes and rehabilitate 66 hospitals to serve 52 districts with 1,600 affiliated villages and a population of 21 million.

Responding to senators’ questions about how the government views increase foreign exchange flows next year, Al-Said that it is basing its plans on $31 billion in remittances, non-oil exports of $32 billion, attracting $11 billion in fresh foreign investments and $9 billion in revenues from Suez Canal transit fees. “These FX inflows will be enough to meet the country’s needs,” she said.

Al-Said detailed current austerity measures and spending cuts which aim to contain inflation and boost investments. “We are only accepting soft-term foreign currency loans that can be used to serve long-term development objectives,” she said, explaining that to cut borrowing the new plan does not include investment for new projects except for “Cairo’s monorail transport project which is based on long-term loan contract and is as an efficient means of transport that will save fuel and time.”

A report prepared by the Senate’s Financial and Economic Affairs Committee on the new plan estimated that the 2020-21 Covid-19 crisis and the subsequent war in Ukraine had led Egypt’s external debt to increase from $155 billion to $163 billion.

Responding to a question on economic reforms, Al-Said that the government is planning to pursue its privatisation programme. “We plan to sell holdings in 32 public companies, but some institutional and regulatory steps are needed and this will take some time,” she said.

The Senate’s report noted that the government’s FY2023-24 plans come amid a global economic crisis triggered by the war in Ukraine which “led to a doubling of the country’s bill for food imports from $6.4 billion in 2017 to $12 billion in 2022 and a spike in inflation rates from 2.7 per cent in 2019 to 19.2 per cent in the first half of 2022 and 39.5 per cent in March 2023”.

The 108-page report concludes that the Russia-Ukraine war will continue to expose the Egyptian economy to financial headwinds for a third year, and in response “the government should accelerate implementation of the State Ownership Policy Document, undertake more investment reforms and develop a strategy to boost industrial exports to $100 billion a year.”

* A version of this article appears in print in the 8 June, 2023 edition of Al-Ahram Weekly

Short link: