-       LE30 billion  second stimulus package to the economy

-       Value-added law for discussion in January

-       Political stability , stimulus packages impact and reform procedures pillars of future fiscal sustainability

Minster of Finance, Dr.Ahmed Galal, asserted that the government is carrying out the economic program it committed since taking over responsibility in last July. The Program is based on striking a balance among activation of economy, realization of fiscal and economic stability and taking procedures to support social justice. He indicated the improvement of the economy performance in next period and a better economic situation to the next governments as fruits of political stability and the positive impact of the stimulus packages and expansionary policies, and results of economic and fiscal reform procedures would be more tangibly and gradually felt next year.

He pointed out that the government pledged to pursue an expansionary policy to activate economy and actually committed that by pumping LE 29. b and on way to issuing another package for about LE 30b. LE20 b. of which is initially decided to be used in public infrastructure investments, and about LE 10b. to meet  the commitments of wages either by raising the minimum limit to LE 1200 or salary increases for teachers of Ministry of education and Al-Azhar.

Dr. Galal said the government pledged to realize a fiscal stability and a balance in the public finance. Thus it was moving on the track by committing to cut down the deficit to 10% of the GDP instead of 14% last year. The ministry also committed in all in its agreement decisions with a constant principle; “not to inject any expenditure without resources to finance.”

About the sources for  financing the stimulus packages , the minister explained at a meeting with foreign press reporters yesterday the style of financing the first package as about half of the ministry of finance deposit estimated about $ 9b fixed in a private account at the Central Bank of Egypt , accumulating since the first gulf war , and not used unless necessary. The government believed it was time to use the deposit equally in cutting down the public debt and activating the economy after a decline in the economy indicators until 30 June and in economy to levels that are unsustainable for a long time.

The minister pointed out that the second package would be financed basically by UAE state’s grants to Egypt agreed upon before. The Minister said some might not believe when he declared two months ago the commitment to pay off dues of the foreign partners in the petrol sector. Now it’s clear to all that the government is honest about its commitment by currently paying off $1.5 b.  of the dues and the rest to be completed thereafter.

For how realizing the fiscal sustainability and economic stability on the medium range, he pointed out that the basic pillars for doing so are to stick to road map and realize security and political stability that alone can activate economy and therefore increase the state’s resources through enhancing local and foreign investments and return of tourism,  in addition to what the government takes of effective procedures to increase fiscal control and growth pushing ahead the economy.

The Minister emphasized that realizing only a 1% growth in the first quarter of the year wouldn’t mean a loss of road because the impact of stimulus package on economic growth would take time for studying the projects, offering, bidding and awarding. This indicates that rates of growth will rise in the rest quarters of the year. The Minister expected realizing an economic growth this year ranging from %3 to % 3.5, an amount that doesn’t meet the government’s ambition of not less than % 4.5 but it would take some time.

in addition to political stability and the impact of stimulus policy of economy, he also indicated that the whole fiscal impact of the government’s reforms would be achieved in the next fiscal year so as to keep the fiscal sustainability, as the government is performing some procedures to increase the state’s revenues such as property tax and value-added tax , and creating new laws for mineral wealth., in addition to other procedures to reduce expenditure on top of which cutting down the subsidy of oil materials , reforming the management of public finance and alleviating the burdens of public debt.

The minister unveiled that the ministry would present to the public a version of the value-added tax law for discussion in next  January, pointing out that the ministry was recently sustained by a second technical mission from the International Monetary Fund, and the bill became semi-ready.

Dr.Galal said that the government’s efforts couldn’t solve all the problems as a number of challenges were to be still before the next governments including maintaining stability of the macro economy with the need to go on with fiscal reforms , structural and institutional reforms including a comprehensive reform in labor market , bolstering the network of social safety and completing the now- starting transform from goods subsidy to individuals and families subsidy to achieve better targeting , fiscal sustainability of pension system ,in addition to improving services of education and health.

The minister stated that the following governments would face real fiscal challenges in relation to files in which reforms need long time to get its results such as improving and developing services of education and health as the current government is working on laying foundations in these two fields and others to facilitate the matter to who come next.

Distributing revenues of growth is a challenge facing the current government and the following governments as well as improving the climate of business and completing the process of tackling the energy subsidy. The current government is determined to start reforming this subsidy with sparing the poor and economy any shocks.

“The government is closely monitoring development of inflation rates while the CBE plays strongly its role in this part”, the minister said.  “We are confident that the two packages will not increase inflation rates significantly as there are unexploited energies in economy “he added. “There are seasonable reasons for the rise of inflation at the present such as LBG gas and deforms in some other markets, we still watch closely as we know the harms inflation inflicts to the citizen. “

“I am not annoyed from the external debt as we can serve it regularly, but from the internal debt which must be actually reduced by working seriously on reducing the deficit of public budget and the cost of debt burdens so as not to aggravate the debt size, in addition to accelerating the rates of GDP so as to improve indicators of public debt. This policy will allow reducing rates of the government debt from 94% last year to about 80% in 12016/17 with respect to going on financing programs of development and supporting social justice.” The Minister concluded

(Source: Ministry of finance)