Egypt’s finance minister says cutting inflation is priority
The Egyptian government’s main priority is to reduce inflation to within the central bank’s target, Finance Minister Mohamed Maait said on Tuesday, adding that economic growth was expected to rise in the financial year starting in July to 4.2 percent, from 2.8 percent this year, according to Reuters.
Maait also said the government aimed to sell more state assets, which would reduce the state’s role in the economy, allow the private sector more ownership, increase productivity and generate revenue to reduce Egypt’s debt.
Egypt’s economy has been hurt over the last half year by the crisis in Gaza, which has slowed tourism growth and cut into Suez Canal revenue, two of the country’s biggest sources of foreign currency. Revenue from the waterway has fallen by more than 60 percent, Maait said, speaking during the IMF Governor Talks series in Washington.
The challenges prompted the IMF to expand financial support to Egypt to $8 billion, while Egypt sharply devalued its currency, made its latest pledge to move to a flexible exchange rate, and struck a record $35 billion investment deal with a UAE sovereign wealth fund. Inflation dipped to 33.3 percent in March from a record 38 percent in September, far higher than the central bank’s long-standing target of between 5 percent and 9 percent.
Egypt generated growth over the last decade by financing giant state projects, including a new $58 billion capital in the desert, through a borrowing spree abroad that quadrupled its foreign debt. The government hopes to lower interest rates to reduce interest payments on debt, Maait said. The central bank so far this year has raised its overnight interest rates by 800 basis points.
The government has put a limit of 1 trillion Egyptian pounds ($20.6 billion) on all public investment, including that of the military, Maait said. The private sector should make up at least 65-70 percent of the economy, he added.
“Giving the main role to the private sector to lead the country is in the benefit of the state. Why? Because we have close to 1 million young people coming to the labor market looking for jobs every year,” Maait said.