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2 February, 2022

In conversation with: Egypt Minister of Finance Mohamed Maait

Egypt's minister of finance tells Courtney Fingar about the country's post-Covid strategies and its plans to be a Middle East and Africa hub for foreign investment.

By Courtney Fingar

How has the Egyptian government adapted its economic and investment strategy since the onset of the Covid-19 crisis?

Egypt’s economic development priorities for the post-Covid years will be a continuation of the efforts we have been focused on, which are economic growth, job creation, social protection, fiscal consolidation and macroeconomic stability, all in the context of International Monetary Fund-supported reform programmes. We want to achieve a sustained delivery of 2% of GDP in primary surplus, bring down the overall deficit to below 5% of GDP by 2024/25 and put our debt-to-GDP ratio on a downward path, to below 85% of GDP by 2024/25.

[We expect to do all of this while also] delivering sustained real economic growth of about 6% over the medium term. These targets are anchored by safeguarding fiscal sustainability, creating adequate jobs that will trickle down to reducing unemployment rates, and supporting inclusive and sustainable economic growth.

Regarding investment policy, we have increased public investment to improve infrastructure and human capital, while further opening up to private investment. Sectors covered by this investment policy include, but are not limited to, the education and health sectors – which are key to improving human capital development in Egypt, and improving our standard of living – as well as manufacturing and export promotion. We believe that supporting economic activity in the manufacturing sector and promoting exports will pave the way to increasing the role of the private sector in leading the economy. This falls within our plan to increase the private sector contribution in our economy from currently 26% of GDP to about 50% of GDP in the coming three years.

Let me say that with regard to foreign investment, although we were affected negatively by Covid-19, we implemented a strategy [aimed at improving] the investment environment. For example, we introduced an automation within all of our [investment facilitation] tasks and the custom systems. Also, we tried to change our laws to reduce bureaucracy and ensure that we have a better business environment. And in the context of our government’s plan to improve business and investment conditions, the planned infrastructure improvements will first and foremost be built on a deeper and wider digital infrastructure. As such, this will help facilitate trade, monitoring and evaluation as well as custom processes involved in doing business in Egypt: to make it easier, simpler and cost efficient, thereby making Egypt an African and Middle Eastern hub, attracting more FDI and building better connections with local investors in sectors that we considered as key for the post-Covid era, such as telecommunications, manufacturing and export-related sectors.

In addition to having the Suez Canal, and the expansion of our ports and the easing of trade policies, Egypt will improve its standing as a country that welcomes investors and business leaders. For the first year ever, Egypt is considered as the most attractive investment destination in Africa, according to the Where to Invest in Africa report issued by the Rand Merchant Bank in 2021. The report also indicated that although the Egyptian economy was affected by the pandemic, Egypt was one of the first countries to return to growth, thanks to the rapid measures taken by our government. This made Egypt one of the few countries in the world able to maintain very positive economic growth throughout the pandemic. It is important to mention that Egypt is also the number one country in Africa in terms of attracting FDI, ahead of the likes of South Africa and Nigeria.

You mentioned shipping and the Suez Canal, and there has been a lot of disruption to supply chains around the world. How do you see Egypt fitting into the changes taking place globally?

In the context of the government plan to improve business and investment conditions, we have a plan to expand investment in our seaports; we are aiming to ensure that the current investment in our ports is attracting more international capital. We tried very hard to attract more companies to work with us, particularly in the Suez Canal area, and this will help ensure that our ports remain attractive for international shipping companies.

Egypt has ambitious plans to develop new cities. How do these plans fit into the country’s overall economic strategy?

We are building more than 15 new cities, including the New Administrative Capital, which we have started to move to already, as government functions will be operating from there. The level of public investment has tripled over the past three years. As part of this we improved our infrastructure substantially through a very good network of roads, bridges, electricity, water, sanitation, gas connections to our cities and villages, and even renewables. We are investing heavily in renewables, and we are investing heavily in improving our transportation sector, such as high-speed electric rail, the monorail, and the underground and national overground.

If you put all these together, along with the construction of the new cities, I have to finance all of that, and at the same time, I am trying to ensure that our debt-to-GDP ratio is stable. One of the ways I can increase revenue is by improving the efficiency of mobilising revenue, by improving the efficiency of our tax system without increasing our tax rates or introducing any new taxes. Year on year, due to efficiency improvements, our tax collection is increasing by 15% on average. Yes, there were services with some added duties or stamp duties, just to improve our revenue increase, but we are striking a balance between stability and our fiscal and monetary policies on one side, and creating jobs and improving the lives of our people on the other.

One important element of all this is human capital development, which we are investing in heavily. Two years ago we introduced universal health insurance, covering one governate, and we started this year in the second governorate to ensure that in ten years all the population will be enjoying universal insurance. We are also upgrading and modernising our education system.

At the same time, we are creating jobs for close to one million new entrants every year to the labour market. All of this together can give you the story of Egypt. Without this, we would have a social problem in the country, because every year our country is adding, net, two million people in population growth. So we need to create jobs fast and improve our utilities. Our beautiful new cities, such as Galala City, the New Administrative Capital and Ismailia, will accommodate this new population.

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