Amid Egypt’s government reshuffle, setting priorities becomes imperative, particularly in navigating the challenging global and regional landscapes that impact the country’s economy.
Underlining these efforts is Egypt’s commitment to enhancing its business and investment environment, crucially bolstered by its $8 billion loan program with the International Monetary Fund (IMF). This initiative aims to elevate the private sector’s role in driving economic growth and job creation.
Rebuilding private sector confidence
The House of Representatives has expressed confidence in the new Cabinet, which includes a restructured economic cluster led by the Prime Minister. Notably, the cluster comprises key figures such as Central Bank Governor Hassan Abdullah, Minister of Planning Rania Al-Mashat, Minister of Finance Ahmed Kouchouk, Minister of Supply and Internal Trade Sherif Farouk, and Minister of Investment and Foreign Trade Karim ElKhatib. Acting as the cluster’s spokesperson, the Minister of Finance will play a pivotal role in shaping economic policies.
“The appointed ministers in the new economic cluster possess robust credentials in engaging with both local and foreign investors, as well as extensive experience in dealings with international financial institutions. They are well-versed in understanding the private sector’s needs within Egypt’s market,” remarked Nada Shousha, Vice Chairman of the Egyptian-American Enterprise Fund, to Business Monthly.
According to Shousha, the economic cluster, along with the government at large, must prioritize rebuilding confidence in the private sector and increasing its involvement in Egypt’s economy for mutual benefit.
“The government must take concrete steps to improve the business environment locally and streamline the licensing process across all sectors, particularly those prioritized by the cabinet,” Shousha noted. Investors also require government action to reduce the costs associated with acquiring industrial land and simplify the land allocation procedures, she added.
Scaling back public investments
Speaking to Business Monthly, Medhat Nafei, Chairman of Arab Alloys and Former Deputy Minister of Supply and Internal Trade, noted the government’s need to scale back its public investments to empower the private sector fully.
“This is a critical priority for the government to achieve its objectives, especially in enhancing economic growth, reducing the budget deficit, managing high-level debt, and ensuring sustainable foreign exchange inflows,” Nafei explained.
According to the government’s program (FY2024/2025 – FY2026/2027), key economic and investment objectives include increasing real GDP growth to 5.5% by FY2026/2027, reducing the budget deficit to 6.6% of GDP by FY2026/2027, lowering debt maturity to 3.9 years, achieving $130 billion in annual exports, raising the industry sector’s GDP share to 31.2%, and boosting the tourism sector.
Nafei cautioned that the government’s program lacks a clear action plan to accomplish these goals over the next three years.
“The government should have established a short-term action plan for FY2024/2025, given the current parliamentary session’s imminent conclusion and the uncertainty of cabinet continuity,” Nafei said. “It’s crucial to have a focused strategy for the first year of this program, especially regarding enhancing the private sector and government divestment from agreed sectors and assets under the IMF loan deal.”
Key reforms
The IMF’s Executive Board is slated to review Egypt’s loan deal on July 29, with approval potentially unlocking an $820 million tranche. This review evaluates Egypt’s adherence to commitments and outlines policy directions until the next review, expected in December.
In June, the IMF announced a staff-level agreement with Egypt on a comprehensive set of policies and reforms essential for completing the third review under the Extended Fund Facility (EFF) arrangement. The IMF cautioned that ongoing regional geopolitical tensions pose significant economic challenges and threats to Egypt’s economy.
“In addressing key risks and domestic structural challenges, including high inflation, elevated government debt, and substantial financing needs, strong policies on the private sector level are crucial,” according to the IMF. “Boosting the private sector’s role in economic activity is essential. The implementation of government reform plans outlined in program commitments will be pivotal in maintaining macroeconomic stability and fostering growth led by the private sector,” the global lender stated.
