Photographer: Shawn Baldwin/Bloomberg

Egypt Unveils Program in Bid to Lure Crucial Aid, Investment

  • Program sees reducing unemployment to 10.7% in fiscal 2018
  • All must be ready to make "difficult" choices: Sherif

Egypt unveiled a long-awaited economic program in a bid to secure foreign aid and investment crucial to reviving its economy.

The plan calls for the adoption of a value-added tax and the sale of stakes in government companies. In an address to parliament on Sunday, Prime Minister Sherif Ismail warned that the nation faced “difficult decisions” and is “still in the danger phase.”

Egypt is struggling to restore investor confidence and unlock more aid to plug a budget deficit that may reach 11.5 percent of economic output in the fiscal year that ends June 30. Last week, the central bank raised its key interest rate by the most since at least 2006 after devaluing the currency by more than 10 percent. The moves were part of a package of measures designed to address a dollar shortage that has impeded growth, hampered investment and made it difficult for foreigners to repatriate funds.

World Bank Loan

Central Bank Governor Tarek Amer said Saturday that the introduction of the VAT is key to securing the first part of a $3 billion World Bank loan. The country has been reliant on tens of billions in aid, grants and investments from wealthy Gulf Arab states since 2013, but those sums probably will be curtailed given the slump in the global oil market.

Amer, in a televised interview, also said the government plans to offer shares in government companies and complete deals to sell three banks by the end of 2016.

The government is targeting economic growth of 6 percent in the 2017-2018 fiscal year, compared with 4.2 percent in 2014-2015, according to a copy of the program obtained by Bloomberg ahead of its presentation to parliament. It aims to reduce the unemployment rate to 10.9 percent from 12.7 percent over the same period and raise the savings rate to 10 percent of gross domestic product versus 5.9 percent.

The presentation of the program had been delayed in part by ministerial changes, including the replacement of the finance and investment ministers.

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