Al-Sisi’s mega projects: a road to growth or to inflation?

Daily News Egypt
4 Min Read

Abdel-Fattah Al-Sisi was sworn in as president on 8 June 2014 and throughout his two-year term he has launched a number of national mega projects.

Al-Sisi announced on Friday that the state is currently managing several national mega projects that have been executed by more than 1,000 companies and nearly 2 million Egyptian workers.

These projects will cost more than EGP 1.3tr, Al-Sisi said in a televised interview with presenter Osama Kamal on Friday.

Securing the funds required for such projects has taken its toll on the economy, negatively affecting both foreign and domestic liquidity.

According to the head of Research Department at Prime Holding, Abou Bakr Imam, the best way to fund these ambitious government plans is through partnership with the private sector.

“Both reassuring international institutions and cooperating with the private sector are a must in order to attract investments contributing to higher growth rates, lower unemployment rates, and increased production,” Imam said.

He explained that the foreign currency liquidity risk is greater now and that current government policies which depend on the public sector, investment certificates, and increasing the supply of funds without any real GDP growth will cause inflation.

Egypt’s money supply grew by 17%, while the economy grew by 4.5% in the same period, increasing the risk of inflation. The current inflation rate is 10.1%.

“A rise in inflation will lead to decelerated growth of the GDP, and a decrease in consumption rates,” Imam said.

Egypt’s latest budget proposed to parliament attempts to decrease spending while increasing revenues by adhering to the regulations of the World Bank and the IMF, decreasing fiscal spending, and encouraging a free and open market.

Monitoring the state of the economy after two years, major indicators have not changed: youth unemployment remains stagnant at 26%;  GDP growth projections for this year is at 4.5% compared to last year’s 4.2 %; inflation is still at 10%; and poverty remains at a staggering 25-30%.

The government’s plans for progress are dependent on the state’s active role in encouraging development.

Consequently, the past two years have been full of public gestures: national projects, international conferences, and a constant search for grants, loans, and investors.

The mega projects that have been implemented by the government are:

A new waterway for the Suez Canal, funded through investment certificates and domestic debt, at a cost of $4bn. It is presented as a first step in the main project to build a logistics and industrial hub along the canal.

The project will also include the construction of six tunnels to link Sinai and the two Suez Canal-bordering governorates of Port Said and Ismailia, at a cost of $8.2bn.

The New Administrative Capital is another highly anticipated project. It will be built on an area of 700 sqkm east of Cairo, between central Cairo and the planned Suez Canal hub north-west of the Gulf of Suez. The total cost of the project is estimated at $45bn, and is expected to be completed in five to seven years.

Another project is the Golden Triangle, aiming to create new industrial and mining projects on 6,000 sqkm extending from the Red Sea cities of Safaga and Al-Qusayr to Eastern Qena in Upper Egypt. Additionally, the 1.5m feddan reclamation project is due to be completed in just two years. The plan reportedly seeks to expand Egypt’s total agricultural land by approximately 20%.

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