What are your expectations for the first half of FY 2014/2015 economic indications?
The economic growth of the first quarter (Q1), from July to September, has registered 6.8% [higher] GDP growth rate. […] This is a very positive indication, but it might be decisive as we are comparing it to the corresponding quarter in 2013 when growth rates deteriorated as a result of the security situation following the June 30 uprising. However, this rate gives us an indication that economic growth is regularly going up and also an indication that the economic growth in FY 2014/2015 will exceed 3.5% and might reach 4%. This will be double the growth average over the past three years. The importance of these indications is that it came in the year the government is carrying out economic reform procedures to regain the financial stability and control the budget deficit, so there are positive indications.
With regard to the unemployment, the rates are still high but the positive indication is that the unemployment rates are going down, as before the January 2011 revolution the rate was around 8-9% and it was increasing until it reached 13.4%. The Central Agency for Public Mobilization and Statistics (CAPMAS) has informed us the unemployment rate has decreased to 13.1% in Q1, a slight decrease but it is a positive indication and the government is working hard to further reduce the rates.
Considering the inflation rates, we are expecting high rates because the government has taken actions regarding the energy subsidies, which led to an increase in the prices of petroleum products. We are expecting the inflation rates to surpass the 10% in 2014. However, this is paralleled by social security procedures, as the government is making a huge effort regarding, for example, subsidising supply commodities and in bread subsidies. Also, this week the government will launch the new system of social security pensions, which is composed of two programmes adopted by Ministry of Social Solidarity and it helps low-income citizens not to be harmed by high prices. We are also developing the transportation system in the country to offer a better service at low prices.
What about the foreign direct investment (FDI) expectations in the Q2 of FY 2014/2015?
The Q2 FDI report is still being prepared as the second quarter is still going, however, the indications show that the number of companies that have been established in this fiscal year is very huge compared to the last period, or it can be the highest ever in the modern history, so this is a positive indication too. We are targeting not less than $10bn in FDI by the end of this fiscal year, we are expecting something around $2.5bn this quarter as there are many oil and gas exploration deals have been recently signed, so this will surely reflect on the FDI. We want these investments to be in different sectors not only the oil sector, as we have the Suez Canal Development Project, the Golden Triangle and the Damietta Port and many others.
Is the government going to pay the remaining $1.5bn Qatari deposit or will it not due to the recent improvement of ties between Egypt and Qatar? Are there any conflicting views within the government in that regard?
The governor of the Central Bank of Egypt Hisham Ramez would better answer this question. There are no different points of view regarding the Qatari deposit regarding the Qatari deposit.
Is the government going to issue bonds in international markets to access fund to repay dues owed to foreign oil firms?
The government is paying a strong attention to the oil foreign debt file, and all the options are on table, so it is very likely to issue dollarised bonds in international markets. Whatever option we took, it will be a strong message to foreign investors especially before the economic summit in March, so there will be new actions in that regard before the summit.
What is the total amount of Gulf assistance Egypt has obtained after 30 June 2013?
In this case, the numbers don’t really count, but what matter is the strong political support that we got especially from Saudi Arabia and the United Arab Emirates, and of course the economic support, which had really supported the ailing economy at that time. There is no official figure but that last we have received was the recent oil agreement between from Saudi Arabia and the UAE.
Are you currently negotiating new assistance packages from the Gulf?
There is a very strong assistance from the Gulf, and everything is possible. As an economist, I do care about the flow of investment. We will officially announce if there is anything new.
What are the reactions of the International Monetary Fund (IMF) delegation, currently in Egypt?
The IMF delegation is very important as they are evaluating the economic policy in Egypt according to Article IV, whether they are financial, trade or investment policies. The delegation is also setting an economic outlook for the country. This is the first IMF Article VI Review Delegation since 2010, so it is very important. The delegation will leave by the end of this week, after that they will prepare a report, which they will file to the high IMF board that will later announce the review result, which is expected to be announced before the end of January 2015. The economic ministerial group has met with the delegation on Sunday, and they have good reactions until the moment, as we currently have a good economic reform story. We told them our plan and our policies.
What about the $4.8bn IMF loan?
No, but the delegation will decide if Egypt still has a funding gap that it will have to fill whether through loans, grants or additional assistance. Regarding the $4.8bn, I think this has to be decided through a parliament and a new government to discuss this issue.
What is the expected funding gap?
The gap was so huge but it was reduced thanks to the government’s measures, the Gulf assistance, returning of tourism and FDI. We can’t say an accurate figure because it can’t be determined on a year-on-year basis; however, it is logical that the figure will annually increase.
It was announced on 23 November that there is an investment settlement with 3 Saudi companies, what are these companies?
The recent settlement of investment disputes have been made with Al-Futtaim Group last week and the dispute of NUBA SEED fruit and vegetable exporting company will be settled within days. We are insisting on resolving the major issues facing investors, and every week we are doing our best to take new actions in that regard.
Is the government going to propose current projects or new project ideas in the March economic summit?
There is a specialised team working for the preparations of the economic summit, but we will surely not propose project ideas. However, the initial feasibility studies of the projects that are going to be proposed have to be prepared, the implementation details of the projects and the needed licenses will also be ready.
Who will lead the development plan in the next period, the state or the private sector?
The private sector of course, all the entities are welcomed to invest, including the military institution, as the opportunities are too much. The investment target by the end of this fiscal year is EGP 337bn, which is only 14% of the investment rate.
Can you tell us more about your latest visit to UAE last week?
I and the governor of Central Bank of Egypt met with Sultan Ahmed Al-Jaber, the UAE Minister of State, where we discussed founding the Employment Holding Company, which will be founded with a capital of EGP 10bn, of which EGP 2bn has already been paid. The EGP 10bn is just the capital; however, the value of investment will be double the value. Around 20% of the capital will be funded by the government, while 80% will be funded through the private sector. We are very keen on establishing this company with Egyptian-Arab capital. It is very important that the company will encourage the formal employment.
The government is also targeting to get $200m from the Khalifa Fund as investments in this company, regardless of the $200m that the Social Development Fund (SFD) has already signed, to invest in the SMEs sector.