Originally in our May - June 2021 Issue. Click here to see the latest release

Titled the National Program for Structural Reforms, Egypt’s second phase of the National Program for Economic and Social Reform kicked off in April, inaugurated by Prime Minister Mostafa Mabdouly.

The program, considered to be the second phase of the 2016 Economic and Social Reform Program that started in the financial and monetary sector, extends over three years.

It targets the real sector with radical and targeted structural reforms. It contains a package of policies that mainly affect productivity levels, by reforming the economy’s structure, liberalizing trade, reforming the vocational training system, and developing capital markets.

Madbouly clarified that the structural reform program’s targets include recording a growth rate of between 6 and 7% in the next three years.

Egypt’s Minister of International Cooperation Rania Al-Mashat said that the second phase of the country’s proposed structural reforms for this year are focused on sectoral reform.

Minister of Planning Hala El-Said indicated that these reforms contribute to furthering the Egyptian economy’s resilience, raising its ability to absorb external and internal shocks, and transforming the Egyptian economy into a productive economy with competitive advantages, which in turn supports the economy’s ability to achieve balanced and sustainable growth.

Minister of Finance Mohamed Maait said that the government is aiming to implement structural economic reforms without leading to the public’s precarity, noting that the reform’s first phase achieved gains that provided the Egyptian economy with a great deal of rigidity in the face of internal and external crises.

He said the state is able to reduce the budget deficit that exceeded 12.5% of the GDP in fiscal year (FY) 2015/16 to 7.9% in FY 2019/20, and is expected to reach 7.7% by the end of this year, and 6.7% in the next fiscal year.

“The primary balance deficit shifted from 3.5% of GDP in FY 2015/16 to a surplus of 1.8% of GDP in FY 2019/20, and is expected to reach 1% of GDP by the end of this year, and 1.5% in next fiscal year,” according to the minister.

The minister added that government debt decreased by 20.5% of GDP over three years, from 108% of GDP in June 2017 to 87.5% in June 2020. By the end of June 2021, government debt is expected to amount to 89% of GDP, and levels are expected to remain the same in the following fiscal year.

“They have also encouraged the government to launch the second phase, which includes a package of structural reforms that do not cause any additional burdens on citizens,” he added.

The reform’s macro policies are put in place to achieve financial stability; control the budget deficit rates and the domestic product’s public debt; maintain a sustainable rate of economic growth; raise the efficiency of collecting public revenues; and to ensure their good management.

This would continue alongside the development projects aiming to improve living standards and support economic sectors and groups most affected by the pandemic, according to the minister.

The National Program for Structural Reforms targets 6 reform pillars, 32 policies and goals, and 88 priority procedural and legislative structural reforms.

This also entails the sustainable development goals being localized at the level of all 27 governorates.

According to announced data, the reform program’s main pillar is to transform the manufacturing industries, agriculture, communications, and information technology sectors.

The three sectors amounted to 26% of GDP in 2019/2020, and this percentage is intended to reach around 30-35% by 2023/2024.

In the same vein, the Primer noted that the communications and information technology’s share in GDP has doubled from 2.7 or 2.8% to at least 5%, and the manufacturing sector’s share increased from 12.5% to 15%.

The agricultural sector is also witnessing improvements, increasing with the shift in the balance of payments, which currently stands at negative $8.5 billion.

Through the program, the government aims to have a surplus of between $3 to 5 billion in the next stage. El-Said explained that the criteria for selecting promising sectors is the capacity for rapid growth, the sector’s relative weight, employment capacity, sectorial networks, international competitiveness, and generating added value.

Regarding the pillars supporting structural reforms, El-Said indicated that it consists of raising the efficiency of the labor market, developing the technical education and vocational training systems, improving the business environment and developing the private sector’s role, raising the efficiency of public institutions through digital transformation and governance, in addition to enhancing financial inclusion and developing human capital.

The Planning Minister reviewed the structural reform program’s methodology, noting the implementation action plan (November 2019-March 2021) was developed by involving the private sector, experts, the business community, and the relevant ministries.

El-Said drew attention to the industrial sector’s strategic objectives, slated to increase the sector’s contribution to GDP to reach 15% in 2024 and to increase the percentage of workers in the sector to 18-20% in the same year, with the provision of 400-460,000 new jobs annually until 2024. Increasing employment rates in small and medium enterprises amounted to 61.5% in 2024.

The sector’s strategic goals include reaching high integration in value chains and an increase in the share of industrial exports.

The rate of high technological components in total industrial exports is expected to rise at a rate of not less than 20% annually, increasing the share of industrial exports with a medium technological component in total industrial exports at a rate of not less than 10% per year, with increased competitiveness of the sector’s industrial exports through a year-on-year rise in industrial goods’ contribution to exports amounting to at least 15%.

The agricultural sector’s objectives include increasing its productivity and competitiveness, achieving food and water security, increasing agricultural exports, job creation, improving farmers’ wage levels, in addition to enforcing contractual agriculture agreements, establishing logistical complexes, maximizing the monetary value per cubic meter, and restructuring cooperatives.

The agricultural sector’s quantitative targets are slated to support small farmers through integrating their efforts, as well as expanding initiatives to support and enhance their marketing capacity, according to the minister.

El-Said referred to the project as strengthening small farmers’ marketing capabilities, aiming to improve living standards and contribute to poverty reduction in the target groups’ rural areas across seven governorates.

The project targets smallholders (less than three acres), those who do not own land, female breadwinners, unemployed youth, and the owners of small and medium-sized enterprises.

The agricultural sector’s strategic goals include increasing the sector’s contribution to the GDP to reach 12% in 2024, increasing agricultural productivity by about 30%, creating new job opportunities and increasing small farmers’ incomes.

The strategic goals include increasing crop exports and agro-industries, doubling the agricultural sector’s export shares to reach 25% in 2024, ensuring sustained food and water security, and improving Egypt’s ranking in the Global Food Security Index to 50 out of 113 listed countries.

The telecommunications and information technology sector’s  targeted contribution to the GDP should be 5% in 2024, maintaining the sector’s growth rates in the range of 16%.

Raising the sector’s productivity and its ability to create jobs and increase the number of trainees in programs offered by the Ministry of Communications and Information Technology and its affiliates across various technological fields, at a growth rate of 20-25% annually, and the creation of 120-140,000 new job opportunities by 2024.

El-Said reviewed the first pillar of the program’s policies, namely developing the technical education and vocational training system, establishing an institutional framework to activate the private sector’s role in field of education and training, and achieving compatibility between the labor market’s supply and demand while supporting women and youth’s empowerment.

The second pillar’s policies include creating a supportive environment for competition, facilitating and developing trade movement, removing restrictions, raising transport efficiency, and providing multimodal transport while supporting the transition to a green economy.

The third pillar’s policies include accelerating digital transformation, continuing administrative and institutional reform, empowering local administration units and strengthening their capacity, along with improved governance of state-owned companies’ performance.

The policies of the fourth pillar also include accelerating financial inclusion, increasing the private sector’s available financing opportunities, revitalizing the money market, and preparing a unified national strategy for financial inclusion.

The fifth pillar’s policies include raising the efficiency of health services and expanding their scope, activating Egypt’s family development strategy, raising the efficiency of educational systems, and increasing coverage of social protection umbrella.