Egypt sees ‘three-year strategy’ to revive its struggling economy
CAIRO: Egypt has an ambitious three-year reform plan that, with foreign help, can revive its struggling economy, the minister of international cooperation said. In an interview, Sahar Nasr said the “three-year strategy” will lead to a return of investments, boost industrial production and create jobs. It comes as Egypt faces not only falling growth and a currency crisis following years of political turmoil, but also increasing public discontent over rising prices.
“Once these reforms are all in place, there will be a positive impact on the economy, and on the social front,” Nasr said. “Especially in the medium and long term.” The economy of Egypt, the most populous Arab country, has faced major challenges since the 2011 ouster of longtime ruler Hosni Mubarak. President Abdel Fattah El-Sisi, who took power after the 2013 overthrow of his Islamist predecessor Mohamed Morsi, has vowed to get the economy back on track.
His government has sought help abroad and on November 11 the International Monetary Fund approved a $12 billion loan to Egypt over the next three years. The country will also benefit from the release of the first tranche of a $1 billion World Bank loan and the deposit by the African Development Bank of the first tranche of a $1.5 billion loan. Cairo is also finalizing an $800 million loan with the European Union. Nasr said the aid programs are helpful but will provide only temporary support. Donors are “helping Egypt to stand on solid ground, helping Egypt not to rely on foreign aid, and not to rely on any borrowing from international financial institutions” in the long run, she said.
‘Three pillars’ of reform
The international aid is “to improve Egyptians’ living standards”, she said, in a country where 27.8 percent live below the poverty line and public debt is nearing 100 percent of Gross Domestic Product. The goal is a return to sustainable economic growth of six percent by 2018, compared with 3.5 percent in the first half of this year. The government’s reform plan is based on “three pillars”, Nasr said.
The first is to boost private sector investment. “The key of the reform program is improving the business environment, encouraging industrialization, and also promoting exports,” she said.
The second is restructuring the budget, including by cutting subsidies, which represent 7.9 percent of government spending. “On social housing, subsidies were initially going to the developers and we moved from this supply side to the demand side, so that subsidies would be effectively targeted to the low-income or middleincome households in a very transparent and effective manner,” Nasr said. The third pillar is monetary reform, she said, describing it as “a major step in terms of economic stability”. Egypt floated its currency on November 3, which was followed by a devaluation from the fixed rate of 8.8 pounds per dollar to a traded rate of 18 pounds per dollar last week.