“Egypt’s infrastructure projects in the last two fiscal years (FY) are the cornerstone of the recovery of the Egyptian economy. The gross domestic product (GDP) has already shown signs of recovery, rising from 2.2% in FY 2013/14 to 4.2% in FY 2014/15,” said Minister of Finance Amr El-Garhy on Wednesday.
He added that the signs of recovery come as a result of the implementation of new national projects, such as the Suez Canal area development project and road networks.
The decline of the GDP from FY2010/11 to FY 2013/14 lead to an increase in the budget deficit and the general debt, explained El-Garhy.
He emphasised that the private sector plays a major role in the development process, and its role must be encouraged in order to increase investments to create new job opportunities.
“The tourism industry is still facing challenges, which has had a negative impact on the GDP growth and on Egypt’s foreign currency revenues,” El-Garhy said.
In order to counter this negative impact, the government is currently implementing an economic program aiming to increase public revenues through the renovation of tax revenues, he added.
Therefore, the government proposed two new laws: value added tax (VAT) and a new law for tax reconciliation, which is projected to resolve $50bn worth of tax conflicts. This law aims to improve the relationship between investors and the Egyptian tax authority.
Clearly, that will require further and continuous improvements to the taxing policies as well as the continuation of e-governance projects to connect different governmental institutions in order to limit tax evasion, said El-Garhy.
He stressed that the Ministry of Finance is doing everything in its power to increase growth while achieving public justice, and further explained that the government will continue to subsidise different social healthcare programmes.
“Currently, we are working on a new legal project for social insurance and pensions, to allow the government to fulfil its obligations while maintaining the fiscal balance,” said El-Garhy.
“The government targets a GDP ratio between 6% and 7% in the upcoming period by finding solutions in the different economic sectors, especially the investment section, and increasing the availability of foreign currency.”
He explained that every 1% increase in GDP is equivalent to creating 150,000 job opportunities. Thus, the increase in the GDP will reduce unemployment
Egypt needs a GDP growth rate between 7% and 8% for the market to absorb the 700,000 new graduates every year.
The government is planning to allocate more land for industrial purposes, explaining that now the government will be able to supply investor needs from electricity to natural gas.
Furthermore, the government is diligent in its efforts to absorb the underground economy into the official one. Currently, the biggest barrier to this achievement is the widespread use of cash transactions.
He added that this goal is dependent on the economic information database project the government is currently building, which will enhance electronic integration between tax revenues and the Ministry of Social Solidarity, leading to the improvement of the business environment.