Egypt’s ambitious Sustainable Development Strategy (SDS) – also known as Egypt Vision 2030 – was introduced at Egypt’s Economic Development Conference in 2015 and aims at achieving a balanced and diversified economy.
Focusing on economic, social and environmental dimensions, the SDS comes amidst the government’s economic reform program.
Business Forward talks to the World Bank’s senior vice president for the 2030 Development Agenda, United Nations Relations and Partnerships Mahmoud Mohieldin about the country’s economic reform program and how consistent it is with the country’s SDS.
Q: What is the latest on the country’s achievements regarding Egypt Vision 2030 in terms of economic development?
A: Regarding the economic development pillar, Egypt embarked on a reform program to address the macroeconomic and structural imbalances that persisted over the years. These reforms included the fiscal consolidation program which introduced the value-added tax (VAT), helped contain the civil servants’ wage bill and gradually reduced energy subsidies.
Additionally, the liberalization of the currency and exchange rate in November 2016 [was implemented], which eliminated the shortage in foreign exchange and reduced the large currency overvaluation. There were also the legislative reforms to improve the business environment, which included new laws on industrial licensing, investment and bankruptcy, as well as amendments to the Companies Law. All of this was necessary to attract private investments and promote growth and job creation.
The economic reform program also included social measures through reforms to the food subsidy system, scaling up the “well-targeted” cash transfers (Takaful and Karama), and supplementing it with the Forsa program, aiming to provide job opportunities to youth graduating from the cash transfer programs.
In terms of transparency, how far has Egypt come?
The Ministry of Finance has begun the implementation of a fully digitized Government Fiscal Management Information System (GFMIS) so that all revenues and expenditures in the state budget are centrally processed through a single Central Bank of Egypt (CBE) account – this enhances transparency. The ministry is also availing fiscal data in a timely manner through pre-budget statements and mid-year reviews, as well as publishing the Citizen’s Budget report to engage the public, alongside fiscal risks reports.
What about the SDS energy targets?
The country has rebuilt the energy sector through a combination of subsidy reforms as well as attracting large private investments in renewable energy, in addition to key legislative reforms in the gas sector that opened up the market for private-sector participation in the gas distribution.
Government expected to expand insurance coverage to an additional 30 percent
What has been achieved in the health and education pillars?
Egypt passed a Comprehensive Health Insurance Law to accelerate progress towards universal healthcare coverage. The new healthcare system is expected to be funded through taxes, employer premiums and individuals’ contributions (with subsidies for the poorest Egyptians). With this reform, the government is expected to expand insurance coverage to an additional 30 percent of the population. The new system – for which implementation had already started in July 2018 – is being rolled out in six phases over a 15-year period.
Regarding the educational pillar, the Ministry of Education is implementing a new ambitious reform program that aims to revamp the quality of the educational system with changes to the curricula, teaching and examination methods. The new reform program has a special focus on early childhood development, the use of technology and improving the quality of teachers.
How would you evaluate the 5-percent growth rate in Egypt – is it real or just inflationary growth?
Egypt’s economic activity has accelerated during fiscal year 2017/2018 to 5.3 percent. The main reason behind the increase is the growth of exports as Egypt’s competitiveness improved significantly following the liberalization of the exchange rate and the elimination of the severe foreign exchange shortages.
Private and public investments have also contributed to growth, followed by Egypt’s resilient consumption. These growth dynamics are in real terms, which exclude inflation.
Growth of exports behind Egypt’s economic growth
What are you expecting of the currency’s performance in the coming months? What about inflation?
Egypt has undertaken reforms in the foreign exchange market which contributed to the successful elimination of the parallel market rate that had emerged between early 2013 and November 2016.
The liberalization of the exchange rate has also improved Egypt’s competitiveness and helped enhance investors’ confidence in the Egyptian market. In the current external environment of tighter financing conditions for emerging markets, the CBE’s commitment to a flexible exchange rate policy will help enhance competitiveness, protect Egypt’s foreign reserves and cushion against external shocks.
Regarding inflation, the growth in domestic prices in Egypt is currently elevated (16 percent last September); yet, it has come down from a high of 33 percent in July 2017. The high inflation spike is thus starting to fall down.
What is your take on how the economic reform program is playing out so far? Is it consistent with Egypt Vision 2030?
Egypt has achieved a good turn-around on macroeconomic indicators. Growth has increased to a 10-year high, unemployment is declining and both external and fiscal accounts are improving. Building on the macroeconomic stabilization efforts, the second wave of reforms are focused on human capital through the reforms in the health and education sectors. This can help Egypt towards achieving its SDS targets.