As part of efforts to track Egypt’s endeavours towards achieving the UN Sustainable Development Goals (SDGs), the country last week launched its “Financing Sustainable Development in Egypt” report during the fourth edition of the Arab Sustainable Development Week.
The report, two years in the making and drawing on the work of 24 experts and researchers, was developed in coordination with the Arab League and Egypt’s Ministry of Planning and Economic Development, which oversaw coordination with various government stakeholders.
The report aims to draw lessons from the UN Millennium Development Goals (MDGs), which ended in 2015, and the SDGs that are now in the process of implementation. Special emphasis is placed on data systems, financing, and the quality of implementation.
The 17 SDGs and their 169 targets have long been discussed separately from their financing, but it was important to produce a report that combined them with relevant data, lead author Mahmoud Mohieldin, UN special envoy for financing the 2030 Sustainable Development Agenda and executive director at the International Monetary Fund (IMF), told Al-Ahram Weekly.
He said that the report provided a platform for knowledge-sharing and that it had been important not only to publish the report, but also to ensure that it was produced in concert with government agencies, local and international experts, and international organisations.
Does the new report cover all 17 SDGs?
The report does not focus on all 17 SDGs, but concentrates instead on SDG 1, ending poverty, and SDG 10, reducing inequality. These two SDGs were selected because they are the ultimate goals of the Sustainable Development Framework. If countries are doing well in investment in human capital, which includes aspects such as health and education, in investment in infrastructure, which includes energy and water, and in investment in resilience, which covers governance and environmental issues, they are going to see better performance on poverty and inequality.
Why was it important to include the financing aspect in the report?
Because financing is not about funding alone: it is about discipline, and it is a reality check on what can be achieved. Many years after the launch of the SDGs, it is not about aspirations anymore; it is about implementation. Some countries are doing well, such as Singapore, Vietnam, China, and the Nordic countries. My concern is about the low- and middle-income countries, which is basically the story of Africa and the Arab countries.
What is the situation of the SDGs in Egypt?
The ratio of those living below the poverty line declined from 32.5 per cent in 2017-2018 to 27.7 per cent in 2019-2020. Those suffering from extreme poverty ($1.90 per day) declined from 6.2 per cent in 2017-2018 to around 4.5 per cent over the same period. But we must check the impacts of the Covid-19 pandemic. We know that Covid-19 had harmful effects, but we also know that governments around the world, including the Egyptian government, carried out measures to support those in need.
In terms of inequality, there is still a lot to be done. It is not just about income inequality, but also about gender-based inequality. Men’s participation in the labour force was 71.2 per cent, while women’s participation was 18.5 per cent in 2019, declining from 22.8 per cent in 2016, which is very low. So, when we talk about unemployment rates, we need to take into consideration the low participation of women in the labour force in Egypt.
Meanwhile, taking inequality in the spatial, geographic, or regional dimension, you will find a discrepancy between rural and urban Egypt. Between 2017-2018 and 2019-2020, income growth in urban areas was 17 per cent, compared to 13 per cent in rural areas. On the flip side, spending growth in urban Egypt was 19 per cent and 12 per cent in rural Egypt. This shows that poverty is heavily concentrated in rural Egypt.
For this reason, we are celebrating the interest of the Egyptian leadership and government in pushing forward the Decent Life Initiative. If this is as successful as hoped over the three-year timeline ending in 2024, it will achieve substantive and widespread results in fighting poverty and by doing so it will also be improving aspects related to equity.
Why is data so important in the report?
Without good data, you might be missing targets, and you might be spending too much and not recognising the overlap between different forms of spending. If you have better data, you can save public funding and better direct private funding to activities.
Data is important not just for the sake of governance and transparency, but also to guide policymakers and investors in their decision-making. For instance, in many African countries, we saw unnecessary competition by donors and development agencies in fighting malaria, to the extent that they were confusing each other and not attending adequately to other aspects of healthcare that needed work.
In Egypt, while researchers recognise that there is now better data on national accounts, fiscal development, and monetary and banking surveys, there are still issues related to sectoral data where progress is needed, especially since the government is embarking on an ambitious programme of structural reforms that is targeting sectors such as industry, agriculture, and digitisation.
There is a problem as well when it comes to data on the level of the governorates. The report also highlights the importance of big data, data that you get from digital systems, phone-call traffic data, and purchasing data. These are important to guide policymakers. If I see less traffic on telecoms networks, it could be an indicator of the degree of access to mobile and Internet services. It could also indicate poverty and that residents of a certain area cannot afford the Internet. If traffic is heavy on the network, it may be a call for more investments.
What is the financing gap that needs to be bridged to meet the targets of the SDGs?
I am considering Egypt as a middle-income country based on international categorisation or as one of the emerging economies. Vitor Gaspar, director of the IMF’s Fiscal Affairs Department, estimates the financing gap based on studies across several countries and not just in Egypt at 4.2 per cent of GDP. This is the equivalent of around $15 billion annually, which is a huge figure. This sum would cover education, healthcare, and some aspects of infrastructure, such as roads, electricity, and water and sewage networks.
There are other studies that say the figure could be double that if infrastructure and the maintenance of infrastructure are included. Julie Rozenberg, senior economist in the office of the regional director for sustainable development in Latin America and the Caribbean at the IMF, and Marianne Fay, World Bank director for Bolivia, Chile, and Ecuador, say that low-income and middle-income countries need to bridge a gap in investment that is close to seven per cent to cover only infrastructure and its maintenance and issues related to climate-related investment and not taking into account education or healthcare.
Then we have a simulation model done by the United Nations Economic and Social Commission for Western Asia (ESCWA), which puts the lower-bound estimate for a country like Egypt at around $760 billion to be bridged from 2020 to 2030. This is around $70 billion per year, which is roughly 17 per cent of GDP.
How can such huge sums be procured?
It will require a holistic approach. Public investment in Egypt needs to increase by 20 per cent to around 10 per cent of GDP. Meanwhile, private investment should increase at least three times from its current figure of roughly five to six per cent. We need private investment to reach around 18 per cent minimum of GDP. Added together, both would exceed 25 per cent of GDP. This is not a far-fetched scenario: it is something that Egypt has seen before and can see again. And we also need to encourage more foreign direct investment (FDI).
Parallel to this, we need to enhance the efficiency of public investment and prioritise some of the spending. If we do that, we can bridge a great deal of the gap. If we cannot cover 100 per cent of the gap, let us try to cover most of it.
To what extent can development assistance help in covering the financing gap?
For a country like Egypt, it would be healthy for the longer-term trajectory to see the role of official development assistance declining. As an economy advances, its reliance on concessional financing and grants and aid should be less relative to its GDP.
This should not minimise the role of the Ministry of International Cooperation and other ministries in securing the best deals for the country in terms of concessional long-term loans from international financial institutions or regional bodies. Much more important than financial official development assistance (ODA) is technical assistance and knowledge sharing from these international organisations, however. ODA is important not just in size, but also in how it is being leveraged to get better private-sector involvement.
How can elevated debt be avoided in this process?
Financing the country’s development agenda requires resorting to further borrowing that needs to be based on a prudent debt-management strategy to ensure debt sustainability. There has been some improvement in Egypt’s public debt management, but the figure is still high. It fell from 103 per cent of GDP in 2017 to 90.2 per cent in 2020. What is striking is the relation of debt servicing to the exports of goods and services. It increased from 28 per cent in 2017-2018 to around 36 per cent in 2019-2020. In this regard, the report emphasises two things: first, the need to enhance the role of investments rather than borrowing; and second, the need to encourage domestic savings and domestic resource mobilisation in order to rely less on external finance and to minimise vulnerability.
How can there be complementarity between sources of financing?
A country’s Integrated National Financial Framework (INFF) establishes a framework for financing national sustainable development priorities, as it spells out how that country’s national strategy will be financed and implemented. INFFs consider finance in a wider scope, as they study the role of government policies and institutional designs to address funding challenges.
Egypt is taking solid steps towards developing its INFF through its joint programme with the Joint SDG Fund. This step comes in line with an increasing global interest, particularly from the Organisation for Economic Cooperation and Development (OECD) and the European Union, in INFF and in cultivating partnerships to support progress in countries towards achieving their national sustainable development priorities.
How often will the report be updated?
Ideally, we need to have an update at least every year, if not every two years. That should not be a problem because the government is already doing updates on the Human Development Report and other monitoring reports for the structural reform programme. Thanks to work on the Decent Life Initiative and the structural reform programme, the report can be updated on an annual basis.
*A version of this article appears in print in the 24 February, 2022 edition of Al-Ahram Weekly.
* Egypt appointed on Friday Mahmoud Mohieldin as the country’s high-level champion for climate action at UN Climate Change Conference 2022 (COP27).