Minister of Finance Amr El-Garhy said that the financial plan aims to initiate development, ensure there are enough programmes for social security and human development, and resolve the current imbalances in the economy.
“The government is not afraid of the increase in exchange rates,” he added. This confidence in the Egyptian economy is supported by the budget increase allocated to subsidies and social security programmes for low-income citizens, El-Garhy continued. The budget has increased by 150-200%.
El-Garhy also confirmed that there are some sectors that are currently working on development.
Ahead of these sectors is the manufacturing sector, which is trying to increase its productivity, rather than depend on imports, El-Garhy said. Regardless, he added, they are still facing a challenging situation, which is allocating hard currency to buy the raw material needed for this sector.
The second sector is the agriculture sector as it has been hit with urbanisation and the loss of green space for building, El-Garhy said. “We are trying to curb this problem by reclaiming more farmlands in the 1.5m acre project and using wells to grow them,” he added.
The tourism sector is also suffering and needs to be revived after it took several blows, El-Garhy added. “We need to work on reviving this sector as well because it was one of the main sources for hard currency.”
The minister noted that tourism used to generate revenues equivalent to $14bn five years ago, and that now it wouldn’t exceed $5bn.
The budget deficit is increasing and has reached an average of 12% during the past four years, while the overall debt increased to $2.7tn. The overall debt equals 99% of the GDP and $53.4bn of it is external, the minister explained.
With the new International Monetary Fund (IMF) loan, which will account for $12bn of a $21bn package, the government hopes to stabilise the exchange rates and cover the budget deficit through ongoing negotiations with the IMF delegation in Egypt this week.
The rest of the $21bn loan will be made up of a $1.5bn loan from the African Development Bank, a $3bn loan from the World Bank, bonds issued in the international market worth $3bn, and another $1.5bn from other sources.
A crisis in the exchange rate was caused by the low liquidity of the US dollar, El-Garhy added, which is stimulated by the decrease in tourism.
Unemployment increased to 13.4%, inflation is at 11%, and a big deficit in the balance of trade and balance of payments is present, El-Garhy said.
Also, the decrease in foreign direct investment (FDI) can be factored as one of the reasons for the difficult economic conditions, El-Garhy added. Regardless, economic growth indicators are improving and expectedly heading towards an increase to 5.2% this year, and 6-7% over the coming years, he said.
According to the World Investment Report 2016, Egypt ranked second in the list of top African countries with FDI growth rates, marking a 49.3% increase in 2015. In 2016, the Egyptian government amended its investment laws to foster an environment that encourages FDI, the report added.