Targeting an economic renaissance

Gamal Essam El-Din , Tuesday 16 Jan 2024

The government’s newly released six-year economic strategy includes ambitious targets for foreign investment, exports, and the exchange rate of the Egyptian pound, reports Gamal Essam El-Din

Targeting an economic renaissance


A few days after the beginning of the new year, the government of Prime Minister Mustafa Madbouli took many by surprise when it announced a comprehensive eight-point economic strategy for Egypt between 2024 and 2030.

Madbouli said the document, released by the cabinet’s Information and Decision Support Centre (IDSC) on 7 January and entitled “Strategic Directions for the Egyptian Economy for the Period 2024-2030,” outlines the government’s economic strategy for President Abdel-Fattah Al-Sisi’s third term in office, which starts in April this year and ends in 2030.

The document will be presented for discussion among economic experts and research centres, Madbouli said. “At a later stage, the document will go to a workshop where the prime minister, cabinet ministers, MPs, economic experts, and business leaders will meet to exchange views,” he added.

In the final stage, the document will go to the National Dialogue for discussion and then receive official approval, cabinet spokesperson Mohamed Al-Homosani told the media this week.

According to IDSC head Osama Al-Gohari the new document aims to achieve an “economic renaissance” in Egypt through enhancing the resilience of the economy to external shocks, improving the quality of life, and achieving an annual growth rate of between six and eight per cent.

Topping the strategy’s priorities is boosting foreign exchange inflows to $300 billion by 2030, nearly triple current annual foreign currency revenues, in order to enhance the economy’s resilience, he said.

To achieve this ambitious objective, the strategy targets a 20 per cent annual increase in exports to reach $145 billion (up from $52-55 billion in 2022), a 20 per cent annual hike in tourism revenues to $45 billion (up from $13 billion in 2022), and increase remittances by 10 per cent annually to $53 billion.

“The strategy plans to boost Suez Canal revenues, including revenues from maritime services, by 10 per cent annually to $26 billion compared to $9.3 billion in 2022 as well as increase foreign direct investment (FDI) by 10 per cent annually to $19 billion up from $10 billion,” Al-Gohari said.

The document is optimistic about the future of the Egyptian pound, saying that the International Monetary Fund (IMF) expects the pound to be traded at LE36.68 per dollar on average during the period from 2024 to 2028.

“The authorities will continue to work towards a flexible exchange-rate regime to close the gap between the official rate of the dollar and its rate on the parallel market,” it says. The pound’s official rate is currently LE30.8, while it has exceeded LE54 in the parallel market.

The government also has big securitisation plans and aims to raise between $1.4 and $10.1 billion annually starting this year until 2030 by securitising 20 to 25 per cent of its dollar revenues. Sherif Sami, former chairman of the Egyptian Financial Regulatory Authority (EFRA), said the securitisation plan is one of several measures aimed at bolstering foreign-exchange revenues.

The document adds that the government plans to form a cabinet-level committee to negotiate with a number of creditor countries and banks to swap public debt for stakes in some state-owned companies, with the objective of converting 38 per cent of Egypt’s external debt to investments.

According to head of parliament’s Economic Affairs Committee Mohamed Suleiman, the document has come as a surprise to many. “While most were expecting a cabinet reshuffle after the re-election of President Al-Sisi last December, we were surprised by the announcement of this new economic strategy,” he said.

The document sets out very ambitious targets for the Egyptian economy over the next six years, he added.

It is clear that the government is serious about boosting the private sector’s contribution to the economy to 65 per cent by the year 2030, Suleiman said, adding that the revenues target of $300 billion annually requires close coordination with the private sector.

He added that this is not the first time that Madbouli’s government has targeted doubling foreign-exchange revenues. In June 2023 Madbouli said the government seeks to ramp them up to reach $191 billion annually by 2026.

To achieve the above target, Suleiman believes that the government should depend largely on exports. “The strategy plans to increase foreign-exchange revenues from sources like tourism, the Suez Canal, and expat remittances, but these sources are volatile and subject to challenges in the world as a whole,” Suleiman said.

Accordingly, exports are the most reliable source of foreign exchange as Egypt has huge potential to increase its industrial and agricultural production, he added.

The document aims to expand Egypt’s cultivated land from 9.6 million feddans in 2021-2022 to reach 12 million feddans by the end of the six-year period in addition to pushing up productivity per feddan to 3.3 tons.

“This will serve two objectives: the first is to increase local production of vegetables and fruit to raise their exports to $14 billion by 2030 (up from $2-4 billion in 2022); while the second is to increase local production of wheat to cover 70 per cent of Egypt’s needs (up from 50 per cent at present) and save foreign currency,” the document says.

On local industry, the document aims to increase the annual growth rate of industrial exports to 20 per cent through increasing industrial complexes from 17 in 2023 to 32 in 2030 and doubling electronic exports by at least 20 per cent.

Haitham Al-Hawari, a member of the Board of the Federation of Egyptian Industries, told Al-Ahram that what makes the industrial sector a promising exporter and foreign-currency earner in the next six years is that Egypt has both robust infrastructure and comparative advantages.

However, the sector needs a coherent strategy that should mainly depend on private producers and opening new foreign markets, he added.

Amr Fatouh, deputy chairman of the Egyptian Businessmen’s Industrial Committee, said that the strategy should be based on boosting the private sector’s contribution to the economy to 80 per cent, and not just 65 per cent, by the year 2030.

“This will come through drafting a new package of investment incentives for the private sector and cutting red tape and bureaucracy,” Fatouh said.

A report by the Egyptian Centre for Economic Studies (ECES), a think tank, agreed that the strategy was a surprise to many. “This document was expected to be the product of a new government with a new mentality and new blood. Before coming up with a new economic strategy, the government should have first conducted an open and objective assessment of the policies it had adopted over the last six years,” it said.

The ECES noted that while the government blames external factors like the war in Ukraine and the global consequences of the Covid-19 pandemic for Egypt’s current economic crisis, it is also important to recognise that the current crisis is also the result of institutional problems and modest performance.

Madbouli’s recent remark that the government will get out of the “stifling economic crisis” within six years also drew criticism. Opposition MP Diaaeddin Dawoud noted that the announcement was “disappointing” and even shocking to business circles.

“It contradicts Madbouli’s earlier remarks in November that the economic crisis and the foreign-exchange crunch will end in a very short time,” he said.

* A version of this article appears in print in the 18 January, 2024 edition of Al-Ahram Weekly

Short link: