By Noah Chasek-Macfoy
After months of statements and focus on the staggering economic challenges facing Egypt, Prime Minister Hisham Qandil presented a strategic 10-year reform plan to improve Egypt’s economic future.
In statements released on Tuesday evening after a meeting of the president and the entire cabinet, the prime minister stated he had developed the plan over a period of three months with a group economic experts.
In addition to his released statements, PM Qandil released a nearly 70 page presentation of the plan which is titled “The Government Action Plan under the Framework of the Developmental Vision for Post-Revolution Egypt.”
Qandil emphasises his government’s responsibility to create an economic plan that serves the demands of the revolution. “In the forefront” the plan states, “[is the] completion of the achievement of the objectives of the 25 January revolution.” Listed among these objectives are most of the priorities mentioned in President Mohamed Morsy’s 100 day plan, including a “speedy return of order and stable security to the streets” and greater bread quality.
The plan outlines three strategic periods. In the short term, until 2014, Qandil is aiming for incremental GDP growth. By 2022 time the plan provides for a 9.8 per cent growth rate
As part of the announcement of his plan, Qandil said on Tuesday that he expects the GDP to grow at a rate of 3.5 per cent in 2012/13. He added that the economy is expected to grow by 4.5 per cent in 2013/14. The Egyptian economy grew at a rate of 2.2 per cent in the financial year that ended on 30 June, 2012.
Ahmed Al-Naggar, senior economic fellow at the Al-Ahram Center for Strategic and Political Studies said 3.5 per cent is overly optimistic, “growth depends on investment, and the current political economic climate will not permit more than 2.5 per cent growth at most.” He pointed to IMF reports that recorded Egypt’s growth in the first nine months of the calendar year 2012 at 1.5 per cent and a prediction of 3.3 per cent growth in 2013.
He continued that there needs to be stronger political will to ensure national security and get the tourism industry back on track. “Having a concrete plan is different than having the desire,” he said.
Morsy’s administration has been working to secure a $4.8 billion loan from the IMF. Acquiring the loan depends on the government’s ability to present an economic reform programme. Government and IMF officials have been stating for months that a plan was in the works.
An IMF delegation, which left on Wednesday, was delayed a month to allow the government more time to finalise the plan. As recently as Sunday, an IMF official stated that the organisation was still waiting to receive a completed economic programme.
Social justice plays a central role in the Morsy government’s vision. Qandil, who is under fire for continuing the “policies of western dependence” by pursuing the IMF loan, said that the new plan is, “based on an economic and social philosophy that differs from those that prevailed before the revolution.”
He added that whereas social justice was previously seen as a variable that followed economic growth, the Morsy government’s plan is based on the philosophy that “social justice is the driving force of economic growth,” mentioning that a high illiteracy rate does not help business owners.
The released presentation reiterates the Morsy government’s commitment to increasing health and education spending. Stating that education receives only 55 per cent of the support that petroleum products receive, while health spending, which is less than 5 per cent of the total budget, receives 11 per cent of the EGP 117 billion allotted to petroleum subsidies.
Despite leaks over the last few weeks suggesting sales and other tax hikes, in addition to restructuring subsidies to close the budget deficits, the plan simply calls for “steps to reform some sales taxes” in addition to “achieving the goals of improved commodities subsidies, stricter oversight and the implementation of rationing cards.”
In regard to the short term period extending through 2013, the plan makes promises with regards to reducing unemployment stating, “the programme aims at providing 700,000 new job opportunities in the coming year” and that “in the agricultural field, 58 thousand jobs will be made available by June 2013” including “4217 jobs in the national initiative for land reclamation.”
On the investment front, details from new projects are sparse, but the programme announces efforts to secure EGP 30 billion in new investment in the coming year.
The report warns the looming budget deficit that reached EGP 168 billion at the close of the fiscal year ending on 30 June 2012 will grow to EGP 184 billion during the current fiscal year, but that this outcome is preferable to the EGP 214 billion deficit that the report predicts would result if the government action plan is not implemented.
Overall the programme’s structure follows an economic plan released by former prime minister, Kamal Ganzouri, in July. Both plans call for similar periods of incremental period growth and 3-4 per cent growth in the upcoming year.