THE CABINET's economic group met on Monday to discuss the implementation of the LE22.3 billion stimulus package to boost the economy over the coming 10 months. The plan aims to push the GDP growth rate to 3.5 per cent during the current fiscal year, up from the two per cent realised in 2012/13, and to reduce the budget deficit to nine per cent of GDP from 14 per cent last year. To achieve these goals, the government intends to settle the LE2.2 billion in areas it owes to contractors, inject investment into infrastructure projects and support workers in the more than 4,000 factories that have closed since the 25 January Revolution. The new spending will be directed at building railways, roads, bridges and 131 potable water and sewage-treatment plants, as well as an extension to the Cairo metro system and other improvements to the city's transport network. The programme has been presented to both Saudi Arabia and the United Arab Emirates, who will be helping to finance it, according to statements by members of the cabinets and government officials in both countries. Together with Kuwait, the Gulf countries pledged to support Egypt's economy with $12 billion in aid, grants and fuel shipments soon after the ouster of former president Mohamed Morsi, a member of the Muslim Brotherhood group. The group is banned in all three Gulf countries. According to the plans, the government intends to try to spur growth while keeping its eye on social issues by not imposing austerity measures like cutting subsidies or imposing new taxes. Part of the extra spending will be directed to increasing the number of low-income homes slated for completion this year to a total of 100,000 and not the 50,000 previously planned. New utilities will be extended to 36 industrial zones, many of them in Upper Egypt, with the aim of attracting 4,000 new projects that will provide 450,000 extra jobs. The plans, together with the decision by the Central Bank of Egypt two weeks ago to cut interest rates, reveal the government's commitment to an expansionary policy backed by a recovery in foreign reserves and the exchange rate thanks to Gulf aid. “A deeper look at the stimulus programme suggests that the government is focussed on domestic sectors with minimum import leakages like construction and domestic tourism in order to achieve the dual, and usually conflicting, objectives of faster growth and a stable exchange rate,” Pharos Brokerage, a leading investment bank, commented in a note.
