Egypt

Country Strategic Framework

Egypt’s current economic strategy is based on its five-year macroeconomic framework and strategy (2014/15–2018/19). This medium-term strategy aims at securing a productive and efficient economy that generates high, sustainable and inclusive growth through sound public finances macroeconomic stability. Specific targets of the plan are outlined below:

  • Sustainable real GDP growth reaching at least 6% by the end of the period;
  • A faster pace of job creation in order to bring the unemployment rate below 10% and in particular to address the high rate of youth unemployment;
  • Greater efficiency in government spending in parallel with a planned reduction of the fiscal deficit to 8 – 8.5% of GDP, and the government debt to within a range of 80 – 85% of GDP;
  • Headline Inflation within a 6 – 8% range;
  • Higher rates of domestic investment;
  • Improved export performance;
  • The development of the country’s human resources supported by increased spending on health, education and Research and Development (up to at least 10% of GDP) as mandated by the Constitution;
  • Enhanced productivity on the national level and continued investment in and upgrading of infrastructure.

For a checklist of planned, implemented and pending reforms, refer to the Ministry of Finance’s strategy paper here: http://www.mof.gov.eg/MOFGallerySource/English/Strategy.pdf

In addition to this strategy, the USD 12 billion IMF loan the country secured was based on the IMF’s support of a further economic reform programme. The programme has four key tenets:

  • a significant policy adjustment including (1) liberalisation of the foreign exchange system; (2) monetary policy aimed at containing inflation; (3) strong fiscal consolidation to ensure public debt sustainability;
  • strengthening social safety nets by increasing spending on food subsidies and cash transfers;
  • far-reaching structural reforms to promote higher and inclusive growth, increasing employment opportunities for youth and women;
  • Fresh external financing to close the financing gaps.

The major pillars of the programme are as follows:

  • Exchange rate, monetary and financial sector policies:
  • Maintaining the flexible exchange rate regime, where the exchange rate is determined by market forces, will improve Egypt’s external competitiveness, support exports and tourism and attract foreign investment. This will also allow the CBE to rebuild its international reserves. Monetary policy will focus on containing inflation and bringing it down to mid-single digits over the medium term. This will be achieved by controlling credit to government and banks as well as by strengthening the CBE’s capacity to forecast and manage liquidity, improving transparency and communication. To further enhance banking sector soundness and promote competition, the CBE will review its supervisory model in line with international best practice, including Basel III principles.

  • Fiscal policy, social protection and public financial management:
  • Fiscal policy must set public debt on a declining path and restore debt sustainability. Tax revenues are projected to increase by 2.5% of GDP over the programme, in large part due to the implementation of the value-added tax (VAT) approved by parliament in August. Government expenditures will be reduced by 3.5% owing to reduction of subsidies and containing the wage bill.

    Social protection programmes will be strengthened to ease the adjustment process and protect vulnerable parts of the population. About 1% of GDP (out of the achieved fiscal savings) will be directed to additional food subsidies, cash transfers to the elderly and low-income families, and other targeted social programmes, including more free school meals.

    The programme also emphasises strengthening public financial management and fiscal transparency. Planned reforms in this area include regularly reviewing the operational performance of the economic authorities; improving oversight of state issued guarantees through the preparation of reports; developing a road map for pension reforms; and a budget statement on economic and public finance developments will be presented to the parliament with every budget.

  • Structural reforms and inclusive growth:
  • The program will help address low growth and high unemployment. Measures will include streamlined industrial licensing for all businesses, greater access to finance for SMEs, and new insolvency and bankruptcy procedures. Job intermediation schemes and specialised training programs for youth will be encouraged. To support women’s labour force participation, availability of public nurseries will be increased and safety of public transportation improved.[64]

  • Country Profile
  • Introduction
  • Broad Economic Indicators
  • Currency and Exchange Rate
  • Competitiveness and Ease of Doing Business
  • Foreign Investment and Largest Companies
  • Foreign Aid
  • Country Strategic Framework
  • Summary of Economic Conditions
  • Implications, Challenges and Recommendations
  • Population
  • Living Standards and Poverty Levels
  • Healthcare
  • Implications, Challenges and Recommendations
  • Qualifications Profile of the Population and Workforce
  • Levels of Schooling and Basic Education
  • Technical and Vocational Education and Training
  • Tertiary Education
  • Innovation in Egypt
  • Implications, Challenges and Recommendations
  • Labour Force
  • Employment by Sector
  • Employment by Skill Level
  • Employment by Occupation
  • Labour Productivity
  • Unemployment and Job Creation
  • Expatriates, Immigrants and the Egyptian Diaspora
  • Wage and Salary Trends and Social Insurance
  • Industrial Relations Framework
  • Labour Market Efficiency
  • The Fourth Industrial Revolution
  • Implications, Challenges and Recommendations

Economy

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