As the faces of minsters change, so do economic goals: analysis of the government’s plan

Sara Aggour
12 Min Read

Appropriating US President Barack Obama’s 2008 presidential campaign slogan, the Egyptian government with its new cabinet launched a new programme to bring about economic change. The cabinet, which recently witnessed a 10-minister reshuffle, revised its previous economic goals to more realistic ones.

New ministers, new goals

Addressing the House of Representatives on Sunday, Prime Minister Sherif Ismail announced the 2030 economic and social strategic plan for the country. Highlighting the short term goals, Ismail focused on fiscal years (FY) 2017/2018. The prime minister said the government is aiming for a growth in the gross domestic product (GDP) of 5%-6%.

Ismail also discussed unemployment, a socio-economic problem that has been addressed by different cabinets at different ages with ranging goals, and which currently stands at 12.7% of the population.

The prime minister said unemployment should range between 10%-11% by the end of FY 2017/2018.  Unemployment has notably surged between FY 2009/2010 and FY 2015/2016, jumping from 9% to 13.3%. By the end of FY 2014/2015, then prime minister Ibrahim Mehleb announced that the unemployment level would drop to below 12%.

The cabinet’s head also discussed the budget deficit, which currently stands at 11.5% of the GDP. The new target is to lower the deficit to 10%-9% of the GDP by the end of FY 2017/2018.

This is the second cabinet reshuffle under Ismail.

Following the new ministers’ swearing in, the cabinet announced that President Abdel Fattah Al-Sisi instructed the new ministers to work on lowering the budget deficit and enhancing taxes and customs revenues to bolster treasury revenues.

The cabinet stated that current public debt stands at 93.3% of the GDP. It added that the target is to lower that figure to 92%-94% of GDP by the end of FY 2017/2018.

On whether or not the government will be able to achieve its target for the debt, Budget Programme Officer at the Egyptian Centre for Economic and Social Rights (ECESROmar Ghannam said he “does not think the government will be able to attain that goal”.

“Public debt, as of now, stands at roughly 98.3% [of GDP] if we factor in the latest increase in USD exchange rates when calculating external debt, and driving it down should be a priority, but from what we see in terms of the government failing to widen and deepen its revenue pool while continuously increasing expenditure especially on non-remunerative projects, I do not think the government will be able to attain that goal,” the ECESR official said.

Discussing the government’s ability to reach its goals for increasing growth rates and lowering unemployment, Ghannam said: “the constant downgrading in this year’s forecasts for growth does not bode well for the government’s ability to keep its promises.”

Ismail addressed the FY 2019/2020 goals, stating that GDP growth is expected to exceed 6% while unemployment will be lowered to less than 9%. The budget deficit is predicted to register 8%-9% of GDP by the end of FY 2019/2020 while the public debt would reach 85%-90% of GDP by the same year, an official statement issued by the cabinet read.

Once more: A new economic team

The new plan came after a speedy reshuffle in the cabinet’s economic team. Former minister of investment Ashraf Salman and former minister of finance Hany Kadry Dimian were axed and replaced with Dalia Khorshid and Amr El-Garhy, respectively.

The former ministers leave behind the fate of the implemented projects and investments of the Egypt Economic Conference for Development (EEDC), which was held in March 2015, and the unannounced rate and implementation date of the value-added tax.

Ghannam said that Dimian was “perceived as instrumental in the World Bank loan negotiations and was attested by many as knowing the nooks and crannies of the ministry because of his history serving there”.

“However [Dimian] utterly failed to manage the deficit and raise revenue, and as of now, I have no reason to believe that the new minister will be able to do any better,” he added, stressing that the public still needs to wait and see what will happen.

Mohamed Abdel Aaty was appointed as the new minister of irrigation and water resources, Khaled El-Anany was selected for as the new minister of antiquities and Mohamed Saafan was chosen as the ne minister of manpower.

Former minister of tourism Hisham Zazzou was not spared after heavy criticism following the International Tourismus-Börse (ITB) Berlin, one of the world’s largest tourism conventions, held between 8 and 12 March.

Zazzou’s efforts to promote tourism were described as “insulting to the country” and “outdated” by social media users and some tourist companies’ representatives who attended the conference. Zazzou was replaced with Mohamed Yehia Rashed.

Rashed’s responsibility lies in attracting tourists who abandoned Egypt after several of militant attacks as well as a recent Russian plane crash. In 2015, the country ranked 10th among Middle East countries and came in 83rd place globally in the ranking for the top tourism-ready economies.

Despite also receiving wide criticism, Minister of Health Ahmed Emad El-Din was excluded from the reshuffle as well as Minister of Education El-Helaly El-Sherbiny.

Some Egyptians criticised the choice of new ministers, arguing that their backgrounds come mainly from the private sector.

“Egyptians used to have an issue with how many ministers were appointed from the private sector during the time’s of Nazif [Egypt’s prime minister from 2004 until 2011],” said Alia El-Mahdy, a professor of economics at the Faculty of Political Science and Economics at Cairo University. “Now, there are more ministers coming from the private sectors than there were during Nazif’s era.”

Ghannam said that the reliance on ministers from a private business background has been a “problem” facing the country for a long time.

“It proved to be very problematic to say the least, and outright catastrophic sometimes,” the ECESR researcher said. “The country is not a company and the populace are not employees, and I believe we already exhausted all the tired metaphors about the marriage of capital and political power.”

“Having a minister with a private business background is not a bad thing,” El-Mahdy highlighting that the problem is not in having ministers with that background but in appointing ministers who will be operating in fields that are not their “specialty”.

El-Mahdy added that “this is not the best selection [for ministers]”, but stressed that the new economic team should be given a chance to prove itself.

Ministry does away with previous FY 2015/2016 budget goals

In its FY 2015/2016 budget, the Ministry of Finance clarified its vision for the year as well as the coming years. The plan stated that the deficit target is lower than 10%, mainly 9.9% of the gross domestic budget, around EGP 281bn. The government added that the target set for FY 2018/2019 is 8-8.6% of the GDP.

While the economic growth in FY 2014/2015 reached 4.2%, the government’s plan for the current year was to achieve a 5% growth rate. The Ministry of Finance also highlighted that the goal for FY 2018/2019 was to reach a 7% growth rate.

The government stated that unemployment is projected to reach 11.5%-12% by the end of the current fiscal year. It added that it would be lower than 10% by FY 2018/2019.

In the draft budget, the government stated that the new goal for public debt reduction in FY 2018/2019 is for it to range between 80%-85% of GDP.

The government also highlighted that inflation will reach 10% to 11% by the end of the current fiscal year and then will decrease again to 7%-8% by FY 2018/2019.

Another significant goal was for international foreign reserves to reach $19.6bn by the end of May 2015.

Al-Sisi and his team: past promises

On 20 May 2014, then presidential candidate Al-Sisi released his much anticipated economic platform.

Al-Sisi promised that when elected, GDP growth will be around 7% by FY 2017/2018 while the budget deficit would plummet to 8.5% by the same fiscal year.

The most progressive goal, however, was made for public debt when the now president promised that it will be reduced to 74.5% of GDP. Between March 2014 and March 2015, the public debt peaked from EGP 1.8tn, 90.4% of the GDP to EGP 2.1tn, which is 93.8% of the GDP.

Al-Sisi’s platform also aimed to decrease unemployment to 8% by FY 2017/2018. The platform promised unprecedented development in the tourism sector, targeting 30 million tourists annually through the development of 26 cities and integrated tourist centres across 21 governorates.

Al-Sisi’s platform also included the reclamation of 4m acres of lands, adding that the “availability of good soil and the access to water both allow this”.

The government’s goals for economic achievements, much like its ministers, have continued to change throughout the past two fiscal years. Ghannam said that government is committed to its plans but he doubts how effective those plans are.

The economist highlighted that the way the government has dealt with the economic crisis it faces is “much like a procrastinating student to an impending exam; what remedial actions it takes usually come extremely late and mostly incomplete, and both of them will probably get a C- at best”.

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