Egypt Is Charting a New Economic Course

Earlier this month, Egypt announced a program of sweeping economic reforms. Its features include fiscal consolidation, a widening of the tax base, rationing energy subsidies, civil-service and institutional reforms, and allowing the Egyptian pound to float. With political support from the highest levels of government, this is a landmark step toward boosting economic growth and development.

It’s no secret that Egypt has been facing serious economic challenges since the 2011 revolution. Catastrophically incompetent economic administration under the Muslim Brotherhood only made things worse, as economic growth hovered around 2%.

The main task of the government of President Abdel Fattah Al Sisi so far has been to restore economic stability and attain inclusive and sustainable development to meet the aspirations of the Egyptian people. With prudent policies, economic growth between 2013 and 2015 almost doubled, to 4.3%, and our budget deficit declined to 11.7% of gross domestic product from 13%.

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The Sisi government understands that Egypt’s future lies in cultivating the economic aspirations of its talented citizens and entrepreneurs without the heavy-handed interventions of the state. Private-sector-led growth is central to unlocking the country’s potential, while the government is adopting necessary legal and regulatory reforms to ensure a conducive economic environment.

With the new economic-reform program, we aim to spur growth to 6%, decrease the budget deficit to 10% and reduce public debt to levels below 88% of gross domestic product by 2018. In addition to the liberalization of our foreign-exchange policy and an increase in energy prices, the program has also introduced a value-added tax and rationed food subsidies.

A complete overhaul of the legislative and regulatory environment for investment is also under way. In the next few weeks, Parliament is expected to pass a new law that will reduce the average waiting period for industrial licenses to 30 days from the current 360. A new bankruptcy bill is also being prepared.

Through public offerings, Egypt will be partially divesting from several state-owned enterprises and banks. For the first time, this will cover public utility companies, which have historically been excluded from divesture as a strategic sector. Megaprojects, mainly in infrastructure, are being carried out as public-private partnerships. The objective isn’t only to keep the private sector as a main stakeholder, but also to ensure a crowding-in rather than crowding-out effect.