Egypt hosted the 2022 Islamic Development Bank Group (IsDB) annual meetings in Sharm El-Sheikh, on 1-4 June, under the theme “Beyond Recovery: Resilience and Sustainability”.
On the sidelines of the event, Daily News Egypt sat down with Minister of Planning and Economic Development Hala El-Said to discuss the outcomes of the IsDB meetings, Egypt’s economic outlook, and the state’s plan to support the private sector.
The IsDB meetings were held this year in light of major economic and geopolitical developments topped by the noticeable decline in the COVID-19 pandemic with the world hopeful to get back on track.
Being the IsDB Governor for Egypt and the Chairperson of the Board of Governors of the IsDB, El-Said told Daily News Egypt that one of the IsDB Governors’ recommendations is to work towards achieving economic integration between members countries to improve self sufficiency and find innovative financing tools that do not increase debts, such as sukuk and endowments.
The Minister indicated that for the first time there would be a ‘State Ownership Policy Document’ that aims to delineate the state’s presence in the economic sectors in order to increase the private sector’s role.
What are the main outcomes of the IsDB meetings? How would the Bank assist in closing the financing gap in climate mitigation?
First of all, we are delighted to host the IsDB meetings in Egypt after 30 years of absence. The meetings witnessed a huge representation from member countries. Several sessions tackled the important issues such as climate change, sustainable development, financing gap, and how to deal with the consequences of pandemic and geopolitical crises.
Currently, there are very limited financing opportunities for developing and middle-income countries. Accordingly, we have been calling for more investments, grants, and concessional financing. Especially, in the current global circumstances following the pandemic, with the soaring inflation, as around 300 million people are expected to face food shortages in IsDB member countries.
In the roundtable at the conclusion of the IsDB, which was attended by the head of the World Bank’s research department, who presented the bank’s inflation and growth forecast. These forecasts were discussed, and in times of uncertainty, the general trend is always pessimistic.
He expected inflation to continue its hike until the end of 2023 at least. We also tackled the economic policies that might carry unintended consequences. For example, when a government is trying to lower the budget deficit, this will lead to lowering public investments, which will negatively impact growth and unemployment.
While determining the fiscal and monetary policies you always try to balance between growth and employment while achieving fiscal discipline. In times of uncertainty and global shocks, such as what is happening now with the soaring inflation, especially that it is not demand driven, but supply driven (cost-push).
Demand-driven inflation is easier to handle, by raising prices. But in other cases, you need to implement an integrated economic policy. Monetary tightening is essential but it also has to be balanced with growth. It is a very complicated issue, especially when you take into consideration the impacts on food security.
During the Governors’ Roundtable, we have also taken stock of how the rapidly changing geo-strategic realities are impacting socio-economic circumstances in member countries. Additionally, we explored how best the IsDB can address the emerging and changing concerns of the member countries, through building resilience to mitigate the negative impact of twin-crisis, supporting member countries in building sustainable Infrastructure, and supporting long-term human capital development.
In conclusion, we have reached several recommendations, the most important of which is that the IsDB must work, in cooperation with other international financing institutions, towards reaching a short-term, medium-term, and long-term plan to achieve food security for member countries. Another recommendation is to work towards achieving economic integration between IsDB members to improve self sufficiency. We also discussed other ways of financing that do not lead to debt obligation, such as sukuk and endowments.
Furthermore, we also tackled the climate challenges, as developing countries are only responsible for around 0.6% of the global emissions, however; we face great consequences of climate change.
It is unfair to ask these nations to bear the burden of climate change mitigation. Accordingly, developed countries should provide investments to developing countries in this regard. We should not sacrifice our development to mitigate a crisis that we did not create.
How will the soaring inflation impact Egypt’s national projects?
Inflation will definitely impact public investments, as a country we want to maintain fiscal discipline. We are trying to keep the budget deficit under control. Maintaining balance between growth and fiscal discipline requires us to reshuffle priorities. This means that we need to allocate the available fund to the most urgent needs, which directly impacts the citizens.
The state is currently working on increasing the availability of commodities and the outlets to offer these commodities at subsidised prices. This aims to mitigate the impacts of inflation on Egyptians.
We have already amended our plans, prioritising the human-capacity building projects with 51% of the allocated funding. Also, we didn’t start new projects, but focused on the completion of the already existing ones, especially in education and health sectors.
We have also worked to coordinate between all ongoing projects, for example, when we order 1,000 of new ambulances we made sure that paramedics that will operate these will be ready, otherwise we won’t order the ambulances. The same was implemented in schools, as we are building 25,000 new schools. We must ensure that teachers are available and so on.
What are Egyptian economy growth forecasts for FY2021/22 and FY2022/23?
In FY2021/22, we are expected to achieve between 6-6.2% GDP growth. Obviously, if the current geopolitical challenges continue, the economic growth in FY 2022/23 is going to be lower. In this case GDP growth might hover around 5-5.5%. However, we can’t scientifically predict the growth in 2023.
When can we expect the IPO of military-owned companies, especially Safi and Wataniya?
Wataniya Petroleum and the National Company for Natural Water in Siwa (Safi) will be offered on the Egyptian Exchange before this year’s end.
What about Misr Aluminium’s capital increase, when can we expect it to take place?
In Misr Aluminium’s case, it won’t be an IPO. It is a capital increase that would be offered to strategic investors in return to getting a stake. I can’t give you an exact date because the negotiations are still ongoing, but it will be within 2022.
Egypt has recently announced several incentives to the private sector, this is not the first time that the government promises incentives, what makes this different this time?
For the first time there would be a ‘State Ownership Policy Document’ that aims to delineate the state’s presence in the economic sectors and activities to increase participation of the private sector. The document will outline the sectors from which the state plans to exit, and those in which it will continue in light of its plan to raise the participation of private sector companies in the country’s investment over the next three years.
The most important difference is that we are ensuring a level-playing field for all, which has always been the main demand for the private sector.
Another important thing, that we are providing tax cuts, and lands under a right of usufruct scheme for several years, these would be offered for targeted sectors that would be announced later.
Moreover, we will offer ‘Golden Licence’ to investors in sectors that will be announced by the state. The Golden Licence is a unified approval that you can obtain from one location which is the General Authority for Investment and Free Zones (GAFI) within 20 working days. Such approval shall be effective without need for any other procedures.