Throwback 2013: Yes, Egypt’s economy is fundamentally improving and here is why…
Egypt latest economic reform program launched in 2016, was a much-needed brave endeavor, developed by home-grown economic team, approved by political leadership, and endorsed by internationally acclaimed institutes such as the IMF. The program aimed at a significant turnaround of Egypt’s main economic KPI’s with the ultimate objective of elevating the Egyptian quality of life based on solid and permanent foundations.
Starting 2018, the program objectives started materializing with clear economic improvement as an initial and fundamental step towards the ultimate objective of the program. This improvement has gained the endorsement of multiple economic and financial institutes and has clearly shed a positive view over the economy’s ratings (multiple upgrades by rating agencies) as well as sequential positive reviews by the IMF (timely and smooth release of tranche payments of the IMF loan stand as a strong proof to that), and many other local, regional and international economic institutes.
Unfortunately, positive tides always bump against rocks, but only to become stronger.
Lately; an article was published by the Foreign Policy, that included numerous false and incorrect statements, and started circulating in social media. Unfortunately; the article is severely blinded by personal political views that have washed over the author and have in turn attempted to both hide and distort facts and numbers published by international entities. This was exacerbated by the negligent handling of the article that is extremely unbecoming of the professional Foreign Policy team.
Accordingly, and to ensure objectivity in judging the economic performance versus 2013, below is a simple 8-point comparison between Egypt’s economic position in 2012/2013, and the current economic standing as of 2018/2019.
1. Egypt’s economy grew by 2.1 percent during 2011-2013, a rate that fell short of population growth rate driving average citizen share in the growth pie to decrease. In 2018/2019, Egypt growth rate reached 5.6 percent according to Ministry of Planning latest published figures as well as IMF updated estimates, with average citizen share of the growth pie growing by 2.2 percent. This makes Egypt one of the strongest and highest growth performer in the region and across emerging countries. Such solid growth performance was cited by all rating agencies like Moody’s and Standard & Poor’s as well as international institutions such as the World Bank, African Development Bank, and the IMF. Maybe all these professional institutions are wrong, and the author of Foreign Policy article is right?
2. According to Egypt official statistical body (CAPMAS), unemployment rate averaged 12.7 percent in 2011-2013 before following a steady declining path over the past 4 years to reach a low of 8.1 percent in March 2019. Creating more jobs for the youth and the Egyptian people stands as the most important benchmark of whether current growth story is benefiting wider segments of the population or not. Thus, not only growth is picking up in Egypt, but it is enabling more people to find jobs.
3. Egypt public finance is certainly in a much better and healthier position today than it was in 2013. According to the Egyptian Ministry of Finance latest estimates as well as the IMF, Egypt overall deficit (government expenditures less revenues) would decline to 8.4% of GDP in 2018/19 compared to 13 percent of GDP in 2012/2013. In simple worlds government expenditures bill would be higher that government collected revenues by 8.4 percent of Egypt’s national income (more often used name is GDP) after such bill peaked at 13 percent of Egypt income in 2012/2013.
4. More importantly, Egypt Ministry of Finance is one month ahead from officially announcing the realization of a primary surplus this year (2018/2019) for the first time in 15 years. Primary surplus means that the current government revenues would exceed its spending without interest payments. This standard and important indicator reflects current government adopted policies throughout the year without considering interest payment bill since it reflects stock of government debt that was accumulated over the years due to successive policies of previous governments. To reiterate, Egypt is on track to realize primary surplus worth 2 percent of GDP versus a primary deficit worth 5 percent of GDP in 2012/2013. This mean that the current government adopted policies enabled Egypt government to realize surpluses after years of running deficits that peaked in 2012/2013 (when the author party was in charge).
5. The current Egyptian government was able to realize such surpluses even though it tripled spending on investments over past four years to upgrade infrastructure base and improve basic services for the entire population including availability and reliability of electricity supplies along with improving quality of existing electricity stations and grids. The government also spent billions to extend roads network and its quality to improve connectivity across governorates and to significantly bring down road’s accidents and fatalities. The government also financed one of the biggest global campaigns that screened the entire 100 million population for virus C and other critical diseases and at the same time provided immediate free treatment for all patients. At the same time, the Government has been financing one of the biggest social housing programs globally with almost 700 thousand units being delivered in 4 years.
6. It is also worth mentioning that the government has realized primary surplus despite spending more on social programs and on social safety nets. To mention few items, the budget allocations to food subsidies increased to EGP 87 billion in 2018/19 up from EGP 35 billion in 2013/2014. Annual budget allocations to treat citizens on behalf of the government including covering their health insurance bill increased to EGP 9 billion in 2018/19 after it was just over EGP 1 billion back in 2013/2014. Budget allocation to finance cash transfers programs (Takaful and karama) reached EGP 17.5 billion in 2018/19 versus less than EGP 5 billion in 2013/14.
7. On debt side, one must pin point that Egypt total government debt (domestic and external) would reach 91 percent of GDP this June after peaking at 107 percent in June 2017 (after the devaluation) and after reaching 90 percent in June 2014. These official figures have been reviewed and confirmed by so many international and local independent and professional institutions. This mean that the current government policies enabled Egypt to bring down its total debt (domestic and external) by 16 percent of GDP in just two years, making Egypt government one of the best performers in terms of its ability to bring down debt levels as ratio to country national income know as GDP. This does not mean that current debt level is not still high and that is why the government has official published its medium-term targets to further bring debt to GDP ratio down to 80 percent in June 2022.
8. According to Central Bank of Egypt, Net International Reserves stands today at USD 44 billion (allowing Egypt to have a buffer that can finance Egypt imports bill for more than 8.5 months) versus USD 14.9 billion in June 2013. This occurred as Egypt current account deficit (sum of Egypt trade balance of goods and services plus money transferred by Egyptian living abroad back home) declined from a peak of almost 5 percent of GDP in 2012/2013 to almost 2.5 percent of GDP in 2018/2019.
To conclude, Egypt economic performance and fundamentals have been significantly improving due to adopted reforms and polices, making the economy stands on stronger footing relative to where it was in 2013. This economic turnaround story is one where all Egyptian contributed to and so all Egyptians should get credit for.