Egypt’s finance minister says cutting inflation is priority

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The Egyptian government’s main priority is to reduce inflation to within the central bank’s target, Finance Minister Mohamed Maait said on Tuesday, adding that economic growth was expected to rise in the financial year starting in July to 4.2 per cent, from 2.8 per cent this year.

Maait also said the government aimed to sell more state assets, which would reduce the state’s role in the economy, allow the private sector more ownership, increase productivity and generate revenue to reduce Egypt’s debt.

Egypt’s economy has been hurt over the last half year by the crisis in Gaza, which has slowed tourism growth and cut into Suez Canal revenue, two of the country’s biggest sources of foreign currency.

Revenue from the waterway has fallen by more than 60 per cent, Maait said, speaking during the International Monetary Fund (IMF) Governor Talks series in Washington.

The challenges prompted the IMF to expand financial support to Egypt to $8bn, while Egypt sharply devalued its currency, made its latest pledge to move to a flexible exchange rate, and struck a record $35bn investment deal with a UAE sovereign wealth fund.

Egypt stays vigilant on inflation

Inflation dipped to 33.3 per cent in March from a record 38.0 per cent in September, far higher than the central bank’s long-standing target of between 5 per cent and 9 per cent.

Egypt generated growth over the last decade by financing giant state projects, including a new $58bn capital in the desert, through a borrowing spree abroad that quadrupled its foreign debt.

The government hopes to lower interest rates to reduce interest payments on debt, Maait said. The central bank so far this year has raised its overnight interest rates by 800 basis points.

The government has put a limit of $20.6bn (EGP 1tn) on all public investment, including that of the military, Maait said. The private sector should make up at least 65-70 per cent of the economy, he added.

“Giving the main role to the private sector to lead the country is in the benefit of the state. Why? Because we have close to one million young people coming to the labour market looking for jobs every year,” Maait said.

“Who will be able to create that? The government cannot create more than 100,000 new jobs. An economy led by the private sector can create 900,000 – even more – jobs, but we have to give them the opportunity.”

Read: How big are Egypt’s economic challenges?