Egypt’s new government led by Prime Minister Ahmed Nazif is carrying out sweeping reforms in a bid to boost the country’s growth rate. A broad range of state assets, including all public banks, are up for privatization. At the same time, corporate and income tax have been capped at 20%. “We need to increase the our competitiveness. Our goal is to integrate Egypt into the global economy” says Foreign Trade Minister Mohamed Rashid.
Egypt’s growth rate lies at 4.1%, but this is not enough, according to Rashid. “This is not a high figure for a country with 2% population growth. We have to create 650,000 new jobs a year. We want a growth rate of at least 6%.”
The cost of the reforms, estimated at 2.5 billion to 3 billion Egyptian pounds, will be financed through the sale of state assets as well as bilateral lending programmes. “We do not expect our budget deficit to exceed 7% [of GDP],” says Mahmoud Mohieldin, the new minister of investment and development. “We are establishing the pillars of a market economy. The attitude to emerging markets is very positive at the moment, but we have to remove obstacles to doing business in Egypt. Our reforms simplify the tax system and enable much better flow of financial resources between banks and industry.”
The banking sector’s structure is also under review. Both ministers expect a wave of acquisitions, bringing in companies with European experience and an improvement of retail and loan services.
“I have a vision of Egypt being a member of the OECD club in 20 years”, says Rashid, “It is better to have a rich country’s crisis than a poor country’s permanent situation.”