The Information and Decision Support Center (IDSC) at the Cabinet has organized the 11th workshop within the framework of preparing an integrated research project to formulate the necessary scenarios to deal with the global economic situation in 2023 and 2024.
The workshop witnessed discussion sessions on the trends of fiscal policy and debt, in the presence of 22 experts from the World Bank, the banking sector, universities, and research centres, besides members of the parliament, representatives of the relevant ministries, and company owners.
At the outset of the session, Heba Abdel Moneim, Head of the Technical Office of the Head of the IDSC, gave an integrated presentation on the trends of economic growth in developed and developing countries, and the expectations of global institutions for recession paths resulting from raising interest rates and the consequences of the Russian-Ukrainian crisis, as well as the most prominent future expectations of crises associated with high inflation rates and faltering supply chains. She also gave a presentation on the developments of public finances in Egypt and its targets during the period (2023-2027) and highlighted the current and future efforts to achieve financial discipline and financial sustainability.
In this regard, Sherif Samy, Chairperson of the Commercial International Bank, indicated that there is a need to continue the structural reform steps of the Egyptian economy, in order to alleviate the burdens of the decline in foreign capital inflows into emerging markets with the rise in US interest rates.
Samy stressed that the global crises necessitate the development of different paths to reduce the burden on the budgets by encouraging the expansion of reliance on various financing tools, such as securitization bonds and sukuk.
Nagwa Samak, Head of the Economics Department at the Faculty of Economics and Political Science at Cairo University, stressed the need to work on providing a flexible fiscal space to enable the Egyptian economy to face the consequences of any exceptional crises, noting the importance of the export and production sectors in reducing debt burdens and inflation and achieving real growth in the gross domestic product and the importance of offering sovereign sukuk recently as an innovative tool that provides the required funds and reduces burdens on the state’s general budget.
Abdel-Fattah El-Gabaly, an economist, said that fiscal policy is the backbone of the Egyptian economy, which necessitates setting policies to reduce public debt through various mechanisms, according to the conditions of domestic and foreign debt, stressing the need for a clear vision to reduce debt and evaluate public spending, and calling for expanding the tax base, reforming the financial conditions of economic bodies, and maximizing utilization of the profits surpluses of government banks, in order to reduce the burdens on the state’s general budget.
Mostafa Abu Zaid, Director of the Egypt Center for Economic and Strategic Studies, stated that reviewing plans to include the informal economy is one of the most important steps necessary to increase the growth of domestic product, in addition to measuring the impact of implementing the Small and Medium Enterprises Law and the extent to which it achieves the goals, and working to increase the returns of economic bodies, and proceeding further advance with tax and administrative reform steps, and solve the file of financial entanglements between ministries.
Medhat Nafie, an economist and chairperson of Metallurgical Industries Holding, indicated that the inflation crises and the disruption of supply chains require continued work on stabilizing the local money supply, while dealing with exchange rate fluctuations to reduce the effects of the import bill, and continuing work to increase the primary surplus and manage it effectively, with natural gas surpluses directed to export to take advantage of rising prices globally, suggesting the importance of using the financial surpluses of economic agencies to enhance their investments, as well as expanding debt swap programs.
Tarek Metwally, former Deputy Managing Director of BLOM Bank Egypt, presented a number of proposals for managing public debt and increasing dollar returns, pointing to the importance of the Ministry of Finance’s new approach towards relying on sovereign sukuk proposals as a mechanism aimed at providing the required funds without pressure on the state’s general budget, stressing the importance of putting a ceiling on the public debt and extending its maturity periods.
MP Ahmed Samir, a member of the Senate Economic and Financial Committee, said that a future map of interest-raising paths must be drawn up, and its impact on the industrial sector determined for the future of the tax community in the country because it is directly linked to the state of public finances.
Mohamed Zaki, Professor of Economics at the Faculty of Economics and Political Science, presented a set of proposals to reduce public debt and increase the contribution of the private sector to the economy, for its role in reducing the burden on the budget in financing investments, and improving Egypt’s position according to the PMI, which in turn affects on the vision of international institutions for the Egyptian economy.
Abeer Rashdan, assistant professor of economics at Future University, pointed out the importance of taking into account the relationship between public debt tracks and total exports, in order to ensure the achievement of the element of sustainability in fulfilling debt obligations, stressing that the structural reform of the Egyptian economy is the best remedy for all the effects of the current crises, by encouraging Investment, and directing more incentives to the industrial and agricultural system and other productive sectors.
Ahmed Gomaa, a professor of economics, called for launching a strategy to reduce public debt and further enhance private sector participation.
Hossam Diaa El-Din, Senior Specialist in Financial Management and Global Governance Practices at the World Bank, stated that administrative governance is one of the most important steps that can be relied upon to increase public revenues by separating ownership from management.
Mohamed Yahya, an expert in financial management at the World Bank, also demanded the need to search for ways to increase the funding of the state’s general budget, praising the launch of the state ownership policy document and the solutions that this represents to achieve the required financial surpluses, and calling at the same time to open the way in the long term for a real competitive climate with the private sector.
Shaima Zaatar, Director of the Community Responsibility Department at Contact Financial Holding Group, presented a set of solutions to increase the empowerment of the private sector and increase its contribution to the economy, in order to achieve increased investments and public revenues, noting the importance of non-bank financial solutions in increasing funds in the market, and demanding at the same time with a package of investment incentives required in that framework.
Mostafa Qutbi, Senior Economist at the Macro-Fiscal Policies Unit at the Ministry of Finance, presented the ministry’s efforts to reduce public debt and diversify funding sources by issuing samurai bonds in Japanese yen with a value equivalent to $500m, after issuing green bonds worth $750m in 2020, noting that with regard to domestic debt, variable-yield bonds were issued to attract investors and limit liquidity guidance in treasury bills, thus contributing to easing the burden on the budget.
Qutbi confirmed that last month, the ministry launched a sovereign sukuk issuance for the first time in Egypt’s history for a period of 3 years, at a value of $1.5bn, which contributes to reducing borrowing costs.
He explained that the ministry is taking serious steps to reformulate the debt strategy, with the aim of extending the life of the debt, diversifying financing procedures, and targeting new financial markets, despite the challenges facing implementing this in the current period, due to the high interest rates.
Qutbi said: “We aim to continue extending the debt life to 3.4 years by the end of June 2023, compared to 1.8 years in June 2014, and to reduce the volume of debt relative to GDP by 2026 to less than 80%. We also aim to increase budget revenues this year by 18%.”
In the same context, Mai Adel, advisor to the Minister of Finance for financial markets, confirmed that there is a great demand for weekly bids on variable-yield domestic debt instruments, which carry important advantages for the public budget in terms of extending the life of the debt, in addition to issuing long-term treasury bills, noting that Egypt’s success In issuing sovereign sukuk with one and a half billion dollars, after it was oversubscribed about 4 times, as the subscription value amounted to about $6.1bn.
Mahmoud Abdel Aziz, a member of the technical office of the Minister of Finance, also pointed out that the ministry is constantly following various financial risks related to the paths of macroeconomic change, interest rates and growth rates, in light of the expected financial obligations, to be included in the financial statement annually.
Farah Al-Masry, senior researcher at the Ministry of International Cooperation, confirmed the ministry’s approach to providing soft financing, with the longest repayment period, with greater grace periods to start paying instalments, in order to finance various development projects with an interest that does not exceed 2%, noting that the involvement of the private sector in financing and investment and reducing financing risk rates requires the presence of incentives and an investment environment that encourages the investor to participate, such as partnership contracts between the public and private sectors “ppp”, which is an appropriate means that does not place any burdens on the state budget.
It should be noted that the Information and Decision Support Centre launched a series of workshops on 2 February with the aim of listening to all opinions and ideas to face global economic challenges, and has organized 11 workshops so far out of a total of 20 planned workshops within the framework of that project.