ince President Abdel Fattah El Sisi assumed post seven years ago, the financial sector in Egypt managed to achieve consecutive successful achievements that were highly praised by international rating institutions.
These achievements caused an increase in foreign investment flows and economic growth rates and were sensed by simple Egyptian citizens despite current challenges to global economy, mainly the outbreak of the coronavirus pandemic.
The Egyptian economy managed to achieve positive indicators during the peak of the coronavirus crisis and was highly lauded by international economic institutions because the economic reforms the government adopted before the crisis earned the national economy a great deal of flexibility to address both internal and external shocks.
Finance Minister Mohamed Maait said his ministry seeks to preserve the gains of the first stage of the national economic reforms program, address points of economic weakness and create new jobs through diversifying production and improving the business and investment climate.
“We seek to strengthen industries, increase exports, raise the economy’s ability to absorb internal and external shocks and turn the national economy into a productive one to be able to compete with global economies,” he added.
He reiterated the ministry’s keenness on going ahead with economic reforms, re-arranging priorities of public spending, increasing funds allocated to human development programs, pumping more investments to improve public services and turning to green economy to rationalize spending and improve public funds management.
Going through international institutions’ positive evaluation of national economy amid the coronavirus crisis, a latest report by the International Monetary Fund expected the national economy to grow by 5.5% this fiscal year and to rise to 8.5% in 2024/2025 fiscal year.
Surplus of Gross Domestic Product (GDP) is likely to increase to 2%, the IMF said.
The Economist magazine also issued a report expecting a 5.7-percent growth rate of the Egyptian economy in 2024 and a 1.5-percent decline of the deficit in the Gross Domestic Product in 2025.
Egypt is likely to become among the top 10 economies worldwide in 2023 with GDP rate climbing from the 21st position globally to the seventh one, it said.
Also, Fitch Rating expected in its latest report that the Egyptian economy will achieve a 3-percent growth rate this year despite a decline in tourism flows and world trade due to the spread of coronavirus.
Moody’s Investors Service also kept Egypt’s credit rating at B2 with a stable outlook, a move that reflects the diversity and resilience of the Egyptian economy, improvement in the performance of State institutions, high flexibility of the banking sector and a strong funding structure.
Over the past seven years, the Finance Ministry succeeded in achieving tangible economic and financial successes, including lowering the budget deficit, achieving a surplus in trade balance and bringing down annual inflation rate from 23% in 2016 to 4.5% in March, 2021.
Government debt to GDP declined by 20% over three years while foreign cash reserves jumped to 40 billion dollars in April, covering service and commodity imports for seven months. Unemployment went down to 7.2% from 13.3 percent in 2013.
In earlier statements, Maait said Egypt took big strides over the past two years in developing and digitizing taxes and customs mechanisms to stimulate investments by simplifying procedures and merging the non-official economy into the official one. The first phase of the unified automated tax system was launched at the centers of large and middle financiers and senior liberal professions.
As per the new system, a financier will have a unified tax number by which he submits his tax returns online and pay all his taxes.
He added that Egypt is among the first countries that applied the electronic bill mechanism. Till now 467 companies have joined the new mechanism over two stages and 6 million electronic forms were submitted in a one month and a half.
About the new customs law, the minister said it aims at simplifying procedures and mobilizing modern technology but with consideration to world trade developments and Egypt’s international obligations to enhance the country’s competitive capabilities and upgrade Egypt’s position in customs ranking.
The new law also targets lowering customs clearance duration to reduce commodity and service cost in local markets, he said, adding that all land, air and maritime ports will be linked electronically.
The new Customs Law reduces the number of documents exporters and importers have to submit to the Egyptian Customs Authorities from 11 under the old law, to 6.
To reduce corruption, a risk management system is introduced to control the release of goods in accordance with established rules, requiring the importer or his agent to present documents relating to the goods to the concerned Customs Authority before the goods are shipped so that the goods can be marked with an initial customs registration number.
This initial registration number must be notified to the shipper to be inserted into all shipping documents for any goods imported. Failing to do so, the goods will not be allowed to be discharged from Egyptian ports, and will have to be re-shipped elsewhere at the expense of the carrier.
As part of government’s efforts to diversify sources of financing and introduce new means to redress the deficit in State budget, Maait announced plans to issue sovereign sukuk.
The House of Representatives approved the Sovereign Sukuk Law that brings unconventional investment tools in compliance with Islamic law, and preserves the state’s right to ownership of assets and the rights of investors.
The finance minister said Egypt’s issuance of sovereign sukuk would contribute to attracting a new segment of investors in accordance with the principles of Islamic Shari’a law, thus providing additional financing and liquidity to government financial markets, reducing the cost of redressing the state’s budget deficit, and prolonging the average life of the debt portfolio.
The step will provide needed financial allocations for investment projects and, at the same time, it runs in line with State efforts to improve living conditions of citizens.
By issuing this law, Egypt enters, for the first time, the Islamic finance market where the total number of sukuk issuances currently in circulation worldwide amounts to about $2.7 trillion.
Among the accomplishments of the financial sector in Egypt was the launching of a national project to develop the countryside in a bid to improve life of villagers.
Some 600 billion pounds will be earmarked to carry out the project over the next 3 to 4 years.
Also, 75 billion pounds were channeled in the new budget to carry out Decent Life initiative in the countryside.
The Finance Ministry seeks within the coming few years to proceed with the implementation of economic reforms and improve financial indicators gradually so that the budget deficit would decline to 6.5% in FY 2021/2022 then to 5.3% in FY 2022/2023 till 4.6% in FY 2023/2024.