US Approves Egypt’s Economic Reforms

Everyone here praised Egypt’s economic reform programme and recognised the effort needed to make such difficult and bold decisions,” American Chamber of Commerce in Cairo (AmCham) President Tarek Tawfik told reporters in Washington as the chamber’s one-week door-knocking mission to the US capital came to an end.

The delegation, the 40th, included representatives of the Egyptian private sector and media and met with prominent business figures in the US capital.

Delegation members attended more than 90 meetings with members of the US Congress, representatives of international financial institutions, think tanks and media figures.

Merza Hassan, executive director for the Arab region at the World Bank, described Egypt’s current economic reform programme as a model the bank intends to introduce in other countries.

Egypt receives the largest portion of World Bank financing for the Middle East region, with the country acquiring some $3 billion of the $6 billion available loans.

The bank currently has a portfolio of projects in Egypt worth some $9 billion, including soft loans with long maturities, technical support and capacity building.

Merza said that Egypt’s fast population growth was a cause for concern, and he emphasised the need to involve religious, cultural and educational institutions in raising awareness of the need to control population growth.

He also stressed the importance of a national social-security programme aimed at protecting the middle classes as the facilitator of economic take-off. Egypt’s government has asked the World Bank for information on international best practices in the field, Merza said.

The welfare of the middle classes in part depends on the provision of educational and health services, Merza said.

While these social strata represent a main source of spending in the economy, a considerable portion of them were now having difficulty paying to send their children to private schools and universities or receive medical treatment in private hospitals.

Head of the International Monetary Fund (IMF) mission to Egypt Supir Lal said that “Egypt’s macroeconomic indicators have achieved significant progress and stability, and the inflation rate is expected to fall sharply soon, as the IMF has predicted.”

He added that an IMF mission was expected to visit Egypt in May for the third review of the economic reform programme implemented by the government in accordance with the loan agreement reached with the Fund.

He said that financial indicators in Egypt had improved significantly with the continued commitment to achieving financial balance, and the government had taken important measures to lower subsidies to make sure that these benefited only those who are in need.

He also stressed the importance of creating new job opportunities through encouraging the role of the private sector, establishing new small and medium-sized enterprises, stimulating creativity, innovation, and entrepreneurship, and creating an environment that helps small businesses to grow.

According to Mahmoud Mohieddin, first vice president of the World Bank, Egypt needs to increase its growth rate to seven per cent annually to improve the population’s overall standard of living.

The three to four per cent rates achieved over the last few years were not enough to make a significant improvement to the standard of living, Mohieddin said.

He added that Egypt needed to increase its savings rate to reach 25 to 30 per cent in order to achieve the targeted growth rates, compared to five to six per cent in recent years.

Increasing the savings rate is important to stimulate investment, a prerequisite for economic growth, he said, adding that the development experiences of China and Vietnam had shown the importance of financing investment through domestic savings.

Mohieddin also called for the establishment of a sovereign investment fund in Egypt to manage the surpluses of profit-making companies, pointing to the experiences of Norway, Ireland and Malaysia in this field. Egypt’s alleged ties to North Korea also came up in the discussions in Washington. “I don’t think North Korea will be a pressing issue,” Tawfik said, adding that Egypt needed better ways to communicate its economic and political achievements in Washington and Europe and to allay concerns over human rights.

He said that both the Egyptian and the American sides had highlighted the importance of free trade, especially since Europe was pushing for more comprehensive free-trade agreements.

“We’re pushing on that front, and given that [US president Donald] Trump’s trade policy is not multilateral but bilateral, a free-trade agreement with the US wasn’t on the agenda last year, but people are listening now,” he said.