‘Egypt reforms must focus on investment’

BEIRUT / Reuters

Egypt needs to implement economic reforms aimed at encouraging more private investment and moving away from subsidies towards targeted transfers for the poor, a senior World Bank official said.
Hafez Ghanem, the World Bank’s vice president for the Middle East and North Africa, told Reuters in an interview that Cairo’s next set of economic reforms should focus on making its bureaucracy more transparent for investors.
Such reforms are important as part of a wider transition across
the Middle East away from a soc-
ial model based on free govern-ment handouts to one more
dependent on private sector development, Ghanem said.
He added that the appointment of a new government in Lebanon
had eased political gridlock and said he believed donors were still committed to tackling Syria’s refugee crisis despite a shift towards economic nationalism in some western countries.
The World Bank said in December that its board had approved the second $1 billion tranche of a $3 billion loan package to Egypt. Ghanem told Reuters he expected to work with Cairo towards approving the third tranche near the end of this year.
“We need to see a big increase in private investment, and not just private investment by big companies, big ticket items. We need to see encouragement for SMEs, for young people to develop more entrepreneurship,” he said.
“The next set of reforms need to focus on the micro level, regulatory reforms, making the system more transparent, easier for investors to come and invest in Egypt,” he added. He also praised Egypt’s reforms so far. “The actions on the macro economic side, on the exchange rate side, were key to making it more attractive for businesses to invest, to have access to foreign exchange, to be able to import, to be able to move their profits back,” he added.

OIL PRICES
Most regional economies have struggled to manage the impact of lower oil prices in recent years,
he said. While oil producers
are working to diversify their economies, importers have also been hit by falling revenue from remittances, aid, investment and tourism from Gulf states.
“Their import bill comes down but… the net impact on the Arab oil importers is not necessarily positive,” he said. However, Lebanon’s appointment of a new president and cabinet last year, its resumption of regular parliament sessions and its efforts to pass a budget for the first time since 2005 were cause for optimism, he said. He was speaking to Reuters during a visit to the Lebanese capital Beirut.
Signs of a loosening up of the political deadlock have allowed much of a $1 billion package that had
already been pledged to Lebanon
to move forward, he said, including the nearly $500 million earmarked for the Bisri dam and water supply project aimed at reducing shortages in Beirut.
Lebanon and Jordan are two of the main hosts for Syrian refugees, part of the world’s biggest displacement crisis since the Second World War, which has put significant stress on both countries’ economies as well as their social models.

Urban consumer price inflation hits 30-yr high

Reuters

Egypt’s annual urban consumer price inflation soared to its highest level in more than three decades, hitting 30.2 percent in February, the statistics agency CAPMAS said on Thursday. It’s the fourth consecutive jump in inflation since the central bank abandoned its currency peg to the US dollar on Nov. 3 in a dramatic move that has since seen the currency depreciate roughly by half. Urban consumer price inflation had reached 28.1 percent in January year-on-year. The February number is the highest level since November 1986, when it reached 30.6 percent, according to Reuters data.
The central bank accompanied the float with a 3 percent interest rate hike to fight inflationary pressures but inflation has been jumping over the past four months and is expected to climb further this year as the government pushes on with economic reforms, including fuel subsidy cuts.
The economic reforms helped Egypt secure a $12 billion loan programme from the IMF in November. President Abdel Fattah al-Sisi is under increasing pressure to revive the economy, keep prices under control and create jobs to avoid a backlash from the public.