(MENAFN- Gulf Times) Egypt's Finance Minister Hany Kadry Dimian said economic growth will accelerate to as much as 5.5% next fiscal year as the country pushes ahead with structural reforms to try to revive confidence in its battered economy.
Dimian said expansion may reach 5% to 5.5% in the year ending in June 2016 after growth "north of 4%" this year. The forecast compares with a 4.2% average of eight economist estimates compiled by Bloomberg.
"Things are progressing and we have some concrete indicators that we can measure," Dimian said in an interview in his office in Cairo on Tuesday, noting a rebound in manufacturing, upward revisions by ratings agencies such as Fitch and the sharp drop in the cost of insuring Egypt's debt. "Our main mission is to bring back confidence."
The upheaval following the 2011 ouster of former president Hosni Mubarak left Egypt's economy stuck in its deepest slump in two decades. Successive governments have struggled to entice foreign investors to return amid near daily protests and violence. President Abdel-Fattah El-Sisi has set his focus on restoring security and stabilising the economy, goals that human rights groups and activists say have entailed curbing freedoms.
Signs of recovery are emerging. The benchmark EGX 30 stock index has surged almost 40% in the past 12 months. Fitch Ratings upgraded Egypt's credit rating on December 19 to B from B- and Moody's Investors Service had earlier revised its outlook for the economy to stable from negative. Both still see Egypt's rating firmly in junk status.
Egypt's five-year credit default swaps, contracts used to protect debt against non-payment, fell to 285 basis points yesterday from a record 925 basis points on the eve of the military's ouster of the Islamists from power in July 2013, according to data provider CMA.
To help economic growth, the central bank cut the benchmark interest rate by half a percentage point and allowed the Egyptian pound to decline to a record low against the US dollar. The move was partly aimed at ending black-market trading by the end of the year to help restore investor confidence ahead of an economic summit in March.
Earlier setbacks helped draw down international reserves to around $15.3bn by the end of December compared with more than $36bn four years earlier.
The nation has relied on assistance from such oil-rich Gulf nations as Saudi Arabia, the UAE and Kuwait, receiving $16.6bn in grants, deposits and fuel in the year ending last June. That aid totalled about $1.8bn so far this fiscal year, Dimian said.
The government used the "generous" Gulf aid "to close a residual gap, but not to boost the economy or not to have it as the main pillar standing underneath the economy," he said. "Our economy is going to be stabilised and progressing based on structural reforms - real ones."
Changes such as cuts in energy subsidies, the introduction of smart card systems to better administer the rationing of food subsidies and broadening the tax base are key to bringing down the budget deficit from projections of 10.2% to 10.5% for the current fiscal year to 8% to 8.5% in fiscal 2018-2019, he said.
In tandem with the collapse in oil prices, the reforms may help the government reallocate funds to long-neglected sectors such as health, he said. The government is constitutionally mandated to allocate 10% of gross domestic product to investing in human capital and providing services to the nation's more than 90mn citizens.
"That will require vast amount of resources to inject" that will partially eat away at "the fiscal impact of reforms we intend to do over the medium term," he said. However, it's "an essential part of our economic programme, which aims to achieve inclusive growth," he said.
The finance minister, who had been heading Egypt's talks with the International Monetary Fund for a $4.8bn loan bid, said the government is "open to all venues and all the alternatives that will be available to fund our financing debt." The country, however, wasn't going to the IMF now for money, he said
The government plans a $1.5bn international bond issuance in the coming three to four months, he said, although no details have yet been set in terms of maturity or terms. Dimian said he prefers two maturities, although the market conditions will be the determining factor.
Customers browse clothing in a Marks & Spencer store on the outskirts of Cairo (file). The upheaval following the 2011 ouster of former president Hosni Mubarak left Egypt's economy stuck in its deepest slump in two decades.
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