CAIRO: In his first 100 days in office, Egyptian President Abdel Fattah Al Sisi has made a fast start on economic reform: slashing costly fuel subsidies, raising taxes and devising infrastructure projects to secure long-term revenues and ease unemployment.
Those are moves that have long been sought by foreign investors. But winning their full confidence will require pushing ahead with further politically-sensitive reforms and sealing an elusive deal with the International Monetary Fund.
A loan from the global lender would serve as a badly-needed stamp of approval for a country battered by political turmoil since a popular uprising ended 30 years of rule by autocrat Hosni Mubarak in 2011.
For decades, Mubarak mostly avoided politically-risky reforms that might anger a population reliant on subsidised food and fuel. His Islamist successor Mohamed Mursi also showed little sign of progress during a tumultuous year in power.
Investors hope that Sisi, a former army chief who overthrew Mursi, cracked down harshly on his followers and won the election to succeed him, will have the authority to enact measures that his predecessors could not.
“We don’t want politicking, we don’t want drama. We want a leader who is going to implement an investment regime for Egypt focused on the longer term,” said Bryan Carter, lead portfolio manager for emerging debt at Acadian Asset Management in Boston.
Raising fuel prices and taxes may ease the burden on the cash-strapped state, which faces a crippling budget deficit around 11 percent of economic output and double digit unemployment.
But Sisi’s ultimate challenge is luring back foreign investors who remain wary of Egypt’s artificially strong currency, rising inflation, stifling bureaucracy and electricity shortages.
“The solution to Egypt’s longer term economic problems will not come from any sort of austerity internally or restructuring of the fiscal budget. It’s got to come from the catalysation of investments,” said Carter.
Egypt has been consulting with the IMF about implementing a value-added tax (VAT), which the government predicts would generate more than $4bn in revenues.
Investors are eager to see the VAT pushed through without opposition or unrest, though officials have not given a time-line for its implementation.
Reuters
