By Ahmed Kamel The Egyptian government is targeting economic growth of 5.8 per cent in the fiscal year 2018/19, which would be the highest rate in a decade. The targeted growth should slash the unemployment rate to below 11 per cent. The escalation of economic growth and the slashing of the unemployment rate are the top objectives for the coming fiscal year, which will begin on July 1. Speeding up economic growth will be a direct outcome of the nation's reform programme, which has been in effect since November 2016. The International Monetary Fund (IMF) said in a report on the Egyptian economy released in January that the government "undertook decisive policy actions". Egypt's real gross domestic product (GDP) grew by 4.2 per cent in the fiscal year 2016/17 compared to the projected 3.5 per cent, according to IMF data "These efforts are increasingly yielding results in terms of restored market confidence, strengthened growth momentum, a narrowing of budget and current account deficits, and the provision of adequate foreign exchange reserves. Sustaining the reform effort will help secure macroeconomic stabilisation and unlock Egypt's potential for higher growth and much needed job creation," the IMF report said. Key targets The 2018/19 state budget is targeting several key objectives: Increasing growth, slashing unemployment, posting a primary surplus of two per cent of GDP, targeting a deficit of 8.4 per cent of the gross domestic product (GDP), compared to 10.9 per cent in the fiscal year 2016/17 and upgrading the management of public finance systems, particularly the automation of all government transactions. The government stopped the use of cheques in official financial transactions last year to boost cashless solutions in a country seeking measures to curb the use of cash and boost financial inclusion. The key objectives include introducing e-payment solutions to combat graft and help boost financial inclusion in general, (the e-payment solutions cover electronic funds, debit, credit and prepaid cards, smart cards, e-money and e-wallets). Enhancing the cashless solutions will ultimately combat the informal economy and increase the state's tax revenues. The Finance Ministry is targeting an increase in tax revenues to 18 per cent of the GDP, up from 13.5 per cent at present. The state's revenue from taxes stood at LE464.4 billion in the 2016/17 fiscal year, Finance Ministry data showed. The IMF said after approving a $12 billion Extended Fund Facility (EFF) to Egypt in November 2016 that fiscal consolidation "will be underpinned by improved revenue mobilisation, including through the new value added tax (VAT) law and better tax administration, and expenditure optimisation". The maintenance of a regular bookkeeping system (ledgers and other accounting requirements) by all businesses, which fall under VAT is also an objective. Bookkeeping will be the first step on the way to merging the shadow economy and the national tax system. Investment-led spending The Sherif Ismail-led Cabinet is targeting the slashing of the budget deficit to four per cent of the GDP by 2022 through driving higher public and private investment rates for inclusive growth. To speed up the economic growth rate, the fiscal policy should be investment-led to stimulate corporate demand in the medium and long terms. To this end, the government is tipped to embark on an expansionary fiscal policy to boost the economy through extra funds for financing infrastructure projects, thus creating more jobs and pushing growth ahead. The state budget, taxation and government spending should be intertwined with the monetary orientation and the nation's economic objectives as a whole. Moreover, regional stability will be a key growth driver for Middle Eastern economies, including Egypt, where tourism recovery will be essential for putting the economy back on track. According to the IMF, Egypt's economic reform programme is setting a "tight reserve money path", which will be achieved by controlling credit to government and banks. The IMF considers undertaking fundamental reform of the exchange rate policy, fuel subsidies and the business climate as key elements to "allow Egypt to address the problems of non-inclusive growth and economic inclusivity". Social protection Egypt's population stands at around 94.8 million, according to data from the Central Agency for Public Mobilisation and Statistics (CAPMAS). Of the total population, 30 million or 28 per cent are poor, CAPMAS data showed. The draft 2018/19 state budget will expand social protection plans through a well-designed programme that targets the country's poor as well as shielding the middle class from falling below the poverty line. Most importantly, the social protection programme should be intertwined with an overall economic master plan for sustainable development to ensure all-inclusive economic growth. Therefore, the social protection network should guarantee a sustained increase in the people's real incomes in terms of commodities and services. The main objective should be how to boost the purchasing power of the pound in the long run. Meanwhile, social protection programmes should buffer individuals from shocks and "equip them to improve their livelihoods and create opportunities" to build a better life for themselves and their families, as a World Bank study put it.
