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Hisham Kandil said in a rare interview that the government aims to cut the budget deficit, now running at about 8 percent of gross domestic product, by 1 percentage point in two years although he said that target was “dynamic”.
Egypt has been on the ropes since foreign investors and tourists, two vital cash streams, fled after the uprising that toppled Hosni Mubarak last year. The revolt gave Egypt its first freely elected president, Mohamed Mursi, who appointed Kandil in July.
Once a darling of frontier market investors with growth of about seven percent a year, the economy has sputtered along, growing just two percent in the financial year that ended in June.
Determined to draw in investors who want to see hefty cuts in fuel subsidies and other reforms, Kandil’s cabinet also has to sell economic restructuring to Egypt’s 83 million people, many in dire poverty and desperate to see the benefits of the revolt.
“For this year, we hope that we will get around three to four percent (growth) and after that we will jump to four, and then 4-5, and hopefully in a few years we will come to seven percent,” he said, adding that Egypt could hit seven percent in four years.
Kandil said his government was finalising its economic reform programme and the draft would be reviewed next week with President Mursi, Egypt’s first civilian president who was propelled to power by the once banned Muslim Brotherhood.
Kandil said the government wants to make fuel and other subsidies more targeted and a coupon or smart card system to ensure the poor, rather than everyone, received subsidised butane cooking gas was expected to start in October.
There will also be cuts to gasoline subsidies in the coming months, he said, adding that these measures were part of efforts to reduce the budget deficit by one percentage point in the next two years, although he said targets would depend on what the population could tolerate.
“Those targets are dynamic. We have to look at what kind of support we will get and how the people will react to these measures,” he said. “I am sure many of them will react positively, but of course we might have some difficulty so it will be a flexible thing too.”
He said that after the president had reviewed the reform plans, there would be a public consultation about the programme. “Hopefully by the beginning of October we will open this for discussion. That also stands true for the IMF programme,” he said.
He was referring to a request for a $4,8 billion loan from the International Monetary Fund, part of a bid by the government to shore up its finances after foreign reserves plunged to about $15 billion, about half their level before the revolt.
Responding to investor concerns that the Egyptian pound could be devalued, Kandil said the central bank was managing the currency in a flexible way but said investors should not delay. — AP.
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