World Bank shifts focus to Egypt's private sector as it gets $1bn loan
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International – The World Bank is pushing to prise open more space for Egypt’s private sector with $1 billion (R 14bn) in new funding, part of the second phase of support that follows two years of painful economic reforms, the bank’s regional vice-president said.
The funding, signed on Sunday, comes on top of $3.15 billion of World Bank budget support provided since 2015 as Egypt floated its exchange rate and cut subsidies, triggering steep inflation that has since eased.
“This is an economy that is now standing on its two feet after a few years of heavy, extremely daring economic reforms,” Ferid Belhaj, World Bank vice-president for the Middle East and North Africa told Reuters in an interview on the sidelines of an Africa business forum in the Egyptian resort of Sharm el-Sheikh.
“The economy’s standing, now it needs to walk, and we believe that the private sector is really the driver.”
Egypt’s macroeconomic indicators have improved since the country began implementing a reform program drawn up with the International Monetary Fund (IMF) in 2016, but the economy remains fragile.
The reforms have strained ordinary Egyptians, tens of millions of whom live under the poverty line. An estimated 700,000 people join the labour market each year - one of the challenges the World Bank support is meant to address.
“We have engaged with what one can call the second generation of reforms that would really push the private sector, deconstrain the private sector, open more space for the private sector and sequentially I guess move the state from a doer to an enabler,” said Belhaj.
The state still controls vast swathes of Egypt’s economy, including three of its largest banks along with much of its oil industry and real estate sector.
The government is planning its first share offers in state-owned companies for more than a decade, though an initial five out of 23 sales have been postponed to next year because of market conditions.
Finance Minister Mohamed Maait said on Sunday he hoped the five sales could be launched at “the beginning of 2019”.
Egypt’s economy is weighed down by a legacy of heavy bureaucracy, and a lack of transparency deters investors, analysts and businesspeople say.
Belhaj said boosting the digital economy and enabling competition was key to resolving such problems.
“You basically go after monopolies and places where rent has been leading for years … you’re basically making a system disrupted, disrupted in a positive and forward-looking way,” he said.
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“If you are giving more space to private entrepreneurs, at some point the balance gets tilted ... and frankly when you talk to the government these days you feel there is a strong belief that this is the way to go.”
The World Bank does not have further commitments for new funding for Egypt and is still “having a conversation” with the government about what support could be offered for economic development in the Sinai peninsula, where Egypt’s security forces have been fighting a militant insurgency, Belhaj said.