Egypt targets higher growth, deficit reduction

CAIRO — Egypt promised tough action to restore growth on Sunday with a government programme that aimed to reduce the budget deficit while protecting the poor as public anger mounts over a deteriorating economy.

Prime Minister Sherif Ismail, reading out a 79-page policy agenda to parliament, said his government would target five to 6 per cent economic growth and push the budget deficit to below 10 per cent by the end of fiscal year 2017-18.

Egypt's economy is currently growing at around 4.2 per cent with a budget deficit of about 11.5 per cent, Ismail indicated.

"It is up to us to take several hard decisions that have long been delayed, [but] any economic steps will be accompanied by the requisite social protections," Ismail said.

He added that the growing population, with the country now 90-million-strong, had strained public services while political instability since the 2011 uprising had hit growth and foreign investment.

The programme promises to introduce a long-delayed value added tax (VAT) and push ahead with reforms to the country's costly subsidies programme. It did not give specifics on how those changes would work.

President Abdul Fattah Al Sisi has pledged to reduce the jobless rate to 10 per cent over the next five years. Unemployment stood at 12.8 per cent in December, according to the government. Analysts believe it may be much higher.

"Sisi, the youth are eating dirt ... Sherif, what has your government done?" protesting students shouted outside the parliament while spreading loaves of subsidised bread on the ground atop their masters and doctoral certificates.

A number of difficult reforms have been delayed, from a VAT that would increase government revenues and a civil service law that would trim the country's public workforce, to an ambitious plan to wean the country off costly energy subsidies that have been scaled back.

Egypt devalued the pound to 8.78 per dollar from 7.73 earlier this month, a move economists said would encourage foreign investment, but which risks hitting the country's poorest through higher inflation, which ran at just over 9.1 per cent in February.

Egypt's parliament will vote on whether to approve the government's policy agenda. If the parliament rejects the programme, it will count as a vote of no confidence against the government. No date has been set for the vote.

Egypt elected its first parliament in more than three years in November. It is dominated by Sisi loyalists.