Prime Minister Sherif Ismail said that there are no reforms without challenges, and that Egypt’s economic reform has went through its most difficult phase, and that the government is committed to continue its reform through, backed by the political leadership’s will and support, towards achieving its targeted aims. Ismail stated at the conference held by the Government and the IMF, in the presence of IMF First Deputy Managing Director, David Lipton, Dr. Hazem Al-Beblawi, the Fund’s Executive Director, Tariq Amer, Governor of the Central Bank, Amr Al-Jarhi, Minister of Finance and Hala Al-Saeed, Minister of Planning, that inclusive growth contributes to job creation and that achieving sustainable growth rates that cover all segments of society is the main goal.
On the other hand, Lipton praised the achievements of the Egyptian government in the successful implementation of its economic reform program, which contributed to the unprecedented indicators reflected over the first quarter of 2018. Lipton stressed the Fund’s support over steps taken by the government and confidence in Egypt’s ability to achieve more and complete its march towards the comprehensive economic reform targeted, pointing out that the coming period will witness more job opportunities and greater participation by the private sector in the ongoing business and projects in various sectors.
Lipton stated that Egypt faced severe economic challenges and that the bold and successful economic reform came at a crucial time. Confirming that macroeconomic stability and market confidence have been restored, growth has resumed, inflation has fallen, and that the public debt ratio is expected to fall for the first time in nearly a decade.
Lipton said that the time has come to take advantage of the hard-won macroeconomic stability and push on to create jobs and raise living standards through sustainable growth. Which will be Egypt’s new challenge to payoff for all the efforts to date, a challenge that will require broadening and deepening the reform agenda.
“We have come to Cairo to participate in a forward-looking conversation about those next steps—to ask what can be done to create greater opportunities for all Egyptians, especially the millions of young women and men looking to build a better future. Broadly speaking, we all know the answer involves strengthening private sector-led economic activity and enhancing openness to be able to invest more, export more and create more jobs.” Lipton added “ I hope we can advance a policy agenda that will be embraced by Egyptian society—government, business, civil society, and the population at large.”
Lipton explained the global economic status reflected by the latest issue of the World Economic Outlook Report (released Bi-Annually by the IMF) confirming that Egypt’s “Exports and tourism are recovering, and the current account deficit is falling. Confidence has improved, and investment has picked up. As a result, growth so far this year is at a 5.2 percent pace and inflation should decline to 11 percent. There is clear evidence that the Central Bank of Egypt’s monetary policy control has contained the second-round effects from the pound’s depreciation, the increases in fuel prices, and the VAT. The subsidy reform has freed up some of the funding needed for targeted social assistance. And it has moved fuel prices in the direction of their true cost. Subsidy reduction makes possible a more efficient allocation of resources across the economy—which will be an important element in unlocking Egypt’s economic potential.”
Lipton stressed the importance of pushing on-forward with the economic reform stating that “In many countries, stabilization without deeper reforms leads to fatigue, complacency and opposition from vested interests that undermine momentum. Like a bicycle, unless you pedal, eventually you slow and then you wobble. In Egypt, there are several immediate reasons to press ahead with reform. Public finances certainly are on a firmer footing, but public debt remains very high. A strong effort is needed both to consolidate and to make room for spending in key areas such as health and education. Delays in following through on the reform of energy subsidies could again leave the budget at risk from higher global oil prices. But more than anything else, Egypt cannot delay on jobs. By 2028, Egypt’s working age population will increase by 20 percent. That works out to a labor force of 80 million Egyptians just 10 years from now. Creating jobs for all those people has to be Egypt’s biggest economic challenge.”
Lipton added that as much as the youth employment represents a challenge, it is as well Egypt’s biggest opportunity, If it can tap the potential of its young people by bringing unemployment and labor force participation to the level of many other emerging market countries, stating that their absorption into the economy could boost growth into the range of 6 to 8 percent, which would be a transformation that will improve the living standards for large segments of the population.
Lipton reflected upon the cases of Indonesia, Mexico and India as countries that succeeded in the past in meeting the current challenges Egypt faces.
Further more, Lipton stressed on the importance of the private sector’s role in this phase, calling for policies to encourage the growth of a healthy private sector as the only realistic source of the jobs that are needed. Suggesting a transparent business climate in which SMEs can thrive, Greater regulatory certainty, Less public sector involvement in the economy to allow for the private sector’s growth, Enough labor market flexibility, Reduction of non-tariff barriers and protections for domestic industries so that Egyptian companies can become part of the global supply chain, and expand to capture a bigger share of the global marketplace and an economic system built on fairness and free from corruption.
Ismail stressed that Egypt is striving to achieve high growth, through developing the country’s infrastructure, legislations attractive for investors and other national and mega projects that require the private sector’s participation with the role of the state as a strong catalyst. Confirming, that the Government opened up new markets, in the fields of transport, communications and energy sectors, as well as developed its established social protection network to protect low-income and marginalized groups, stating that the Government is seeking a strong economy supported by a private sector that can contribute to employment generation, especially for young people, as well as, developing the citizens standard of living.