Egypt’s Cabinet has approved a three-month public spending rationalisation programme, including a 20 per cent cut in electricity consumption across government entities and public economic authorities.
Yet the government has rightly insisted that restrictions must not compromise public services or the performance of the entities concerned. The objective is to ease any potential repercussions on the country’s economic growth.
Here lies the real opportunity. If the three months produce verified savings, the practices behind them, from energy audits to tighter procurement discipline, should become permanent features of public financial management rather than emergency measures shelved when conditions improve.
The logic is sound. Government buildings, lighting, cooling and administrative overheads offer genuine room for savings, and every pound not wasted is a pound available for health, education and social protection.
However, an integration of monetary and fiscal policies is a must to speed up economic growth, close the gap in Egypt’s finances, and achieve sustainable development in the long run.
An efficient taxation regimen and affordable interest rates for borrowing are key drivers for growth in the long term.
The Moustafa Madbouly Cabinet is striking a balance between growth needs and investment incentives. However, there should be partnerships with the private sector in this regard. Sustainable development shouldn’t be funded by the government alone, as the private sector should partner with the state in these endeavours.
The monetary policy set by the Central Bank of Egypt (CBE) has been the market’s key driver since the November 2016 currency float.
The monetary and fiscal policies should be well integrated for efficient employment of production factors. The fiscal policy should be investment-led to stimulate corporate demand in the medium and long term.
The state budget, taxation and government spending should be intertwined with the monetary orientation and the nation’s economic objectives as a whole.
By all means, the Egyptian policymakers are committed to a stronger policy package to restore macroeconomic stability, strengthen investor confidence, and achieve broader programme objectives.
