Moment of Opportunity—Delivering on Egypt’s Aspirations by Christine Lagarde, IMF Managing Director

IMF News, March 13, 2015

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Canonical URL: Moment of Opportunity—Delivering on Egypt’s Aspirations by Christine Lagarde, IMF Managing Director

Speech by Christine Lagarde, Managing Director, International Monetary Fund.
Sharm Al-Sheikh, Egypt, March 13, 2015. As Prepared for Delivery.
Central theme: seize a "moment of opportunity" to deliver stronger growth, better health and education, and higher living standards for Egyptians.

Energy subsidy reform began in mid-2014; part of the savings used to finance a targeted cash transfer for poor families.
Tax measures: increases in excises on tobacco and alcohol and plans for VAT.
- Non-oil tax revenue is only at about 10 percent of GDP.
Investment increases, including the Suez Canal project, financed mainly by ordinary members of Egyptian society.
Emphasis on smaller projects and private investment (domestic and foreign) to complement public projects; investment requires confidence and policy certainty.

Primary prescription: stay the course on the reform agenda.
Business environment:
- Egypt ranks 119 out of 142 in the World Economic Forum’s Competitiveness Index.
- Example frictions: it takes on average over 60 days to register property and over 1000 days to enforce a contract.
- New investment law is an important step; further deregulation recommended to attract investment and create productive jobs.
Trade and external sector:
- Egypt’s non-oil exports were only 5 percent of GDP last year—identified as a "huge missed opportunity."
- Exchange rate flexibility recommended to balance demand and supply of foreign currency and support growth and financial position.
Financial sector:
- Only 10 percent of Egyptians have a bank account.
- Adoption of a micro-finance law could help develop the financial sector and extend credit to small job-creating businesses.
Overall: business environment reform, trade liberalization, and a stronger financial sector can generate tangible increases in investment and growth, provided reforms are sustained.

Definition: growth that offers opportunity to all—women, youth, unemployed, disabled—and shares benefits widely.
Youth and women:
- Over the coming five years, there will be more than 600,000 new entrants to the labor market per year.
- Today one in three young Egyptians below 25 years of age is unemployed—almost three times the overall unemployment rate.
- Women’s labor force participation rate is 22 percent, compared with 73 percent for men.
- Barriers include large wage gaps, high commuting costs, and inflexible work schedules.
Social spending and human capital:
- Calls for increasing and improving the quality of social spending—particularly education and health.
- More efficient spending on health and education could support higher and more inclusive growth while preserving fiscal sustainability.
- Better education can narrow wage gaps and improve private-sector female participation.
- Improved public transport can enable safer commuting and job access for women.
Linkages: integrating women and youth more effectively into the economy is both inclusive and good economic sense.

Restoring economic stability, instilling confidence, and spurring jobs and growth require steadfast implementation of reforms.
The IMF remains committed to helping Egypt achieve better living standards.
Opening quote: Umm Kulthūm—“wa ma nay’lu al mata’alibi bettamanni” (aspirations cannot be attained through wishful thinking, but through toil and perseverance).
Closing quote: Naguib Mahfouz—“You can tell whether a man is clever by his answers. You can tell whether a man is wise by his questions.”

Christine Lagarde, "Moment of Opportunity—Delivering on Egypt’s Aspirations," Sharm Al-Sheikh, Egypt, March 13, 2015.