{
  "title": "How Can Egypt Achieve Economic Stability and Better Living Standards Together?",
  "publication": "IMF Blog, February 11, 2015",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2015/02/11/how-can-egypt-achieve-economic-stability-and-better-living-standards-together",
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  "overlayPath": "/en/blogs/articles/2015/02/11/how-can-egypt-achieve-economic-stability-and-better-living-standards-together/index.md",
  "summary": "Political transition over the past four years left chronic economic problems unaddressed and made new problems acute.",
  "sections": [
    {
      "heading": "A difficult starting point",
      "content": "- Political transition over the past four years left chronic economic problems unaddressed and made new problems acute.\n- Key socioeconomic outcomes in 2013/14:\n  - Economic growth: 2.2 percent.\n  - Unemployment: peaked at 13.4 percent, with highest levels among youth and women.\n  - Poverty: rose to 26.3 percent the year before, with another 20 percent of the population estimated to be close to the poverty line.\n  - Average inflation: 10 percent.\n  - Central bank reserves: fell short of covering three months worth of imports.\n- Fiscal and debt deterioration between fiscal year 2010/11 and 2013/14:\n  - Overall fiscal deficit rose from 9.8 percent of GDP in fiscal year 2010/11 to 13.8 percent in 2013/14.\n  - General government debt increased from 76.6 percent of GDP to 90.5 percent over the same period.\n- Structural weaknesses predating 2011 include inefficient subsidies, cumbersome business regulations, low human capital, poor infrastructure, low access to finance, and poor external competitiveness."
    },
    {
      "heading": "Policies to raise growth and lower deficits: subsidy reform and exchange rate flexibility",
      "content": "- Fuel subsidies:\n  - In 2013/14, Egypt spent over 6 percent of its GDP on fuel subsidies—more than on health or education.\n  - Fuel subsidies tend to benefit better-off segments and capital-intensive industries rather than the poor and labor-intensive industries needed to reduce unemployment.\n  - Subsidies contribute to large fiscal deficits and rising public debt, limiting spending on infrastructure.\n- Subsidy reform measures and effects:\n  - Increasing fuel prices can generate large savings.\n  - Savings can finance conditional cash transfers to vulnerable people and allow more resources for roads, schools, hospitals, and power plants.\n  - The authorities began implementing subsidy reform the previous summer and are designing a conditional cash transfer system financed in part by subsidy-savings.\n  - Rebalancing spending toward health, education, and infrastructure can help the poor in the short term and raise potential growth in the longer term.\n- Exchange rate flexibility:\n  - A more flexible exchange rate can strengthen competitiveness, attract foreign investment and tourism, and support exports of new industries.\n  - These developments can create jobs and support long-term growth and higher living standards.\n  - Recent movement of the exchange rate of the Egyptian pound against the U.S. dollar is described as a step in the right direction."
    },
    {
      "heading": "Structural reforms are crucial",
      "content": "- Improve business environment:\n  - Example: According to the World Bank, it takes 218 days to get a construction permit in Egypt, compared to only 29 days in the Republic of Korea.\n  - Dismantling inefficient regulations and red tape is essential to increase investment, spur jobs, and formalize the informal sector.\n  - Current plans to issue a revised investment law are noted as moving in the right direction.\n- Build modern, transparent institutions:\n  - Institutions should encourage accountability, good governance, and fair, transparent rules to ensure gains from growth benefit all and access to jobs and opportunities is evenhanded.\n- Financial sector improvements:\n  - Only 10 percent of Egyptians currently have bank accounts.\n  - Increasing diffusion of financial services and extending more credit to small job-creating businesses could help the economy.\n  - Adoption of a micro-finance law could help develop the financial sector.\n- Education and human capital:\n  - Improving the educational system is paramount; jobs require graduates prepared for the modern labor market.\n  - The constitution mandates rebalancing spending toward health and education; if implemented efficiently, this could support higher, more inclusive growth while preserving fiscal sustainability."
    },
    {
      "heading": "Conclusions and policy implications",
      "content": "- The objectives of restoring economic stability and improving living standards are complementary; several policies can advance both goals.\n- Steadfast implementation of reforms can:\n  - Restore economic stability (lower deficits, debt, inflation; rebuild reserves),\n  - Spur jobs and growth,\n  - Improve poverty and social outcomes through targeted transfers and spending on human capital and infrastructure.\n- The IMF remains committed to helping Egypt achieve better living standards.\n\nChristopher Jarvis, February 11, 2015\n\n---\n\n\n References\n\n- عربي\n- https://www.imf.org/wp-content/uploads/2015/02/egypt.jpg\n\nSource: https://www.imf.org/en/blogs/articles/2015/02/11/how-can-egypt-achieve-economic-stability-and-better-living-standards-together"
    }
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    "Authors: Christopher Jarvis",
    "Published: February 11, 2015",
    "Political transition over the past four years left chronic economic problems unaddressed and made new problems acute.",
    "Key socioeconomic outcomes in 2013/14:",
    "Fiscal and debt deterioration between fiscal year 2010/11 and 2013/14:",
    "Structural weaknesses predating 2011 include inefficient subsidies, cumbersome business regulations, low human capital, poor infrastructure, low access to finance, and poor external competitiveness.",
    "Fuel subsidies:",
    "Subsidy reform measures and effects:",
    "Exchange rate flexibility:",
    "Improve business environment:",
    "Build modern, transparent institutions:",
    "Financial sector improvements:",
    "Education and human capital:",
    "The objectives of restoring economic stability and improving living standards are complementary; several policies can advance both goals.",
    "Steadfast implementation of reforms can:",
    "The IMF remains committed to helping Egypt achieve better living standards.",
    "[عربي](http://blog-montada.imf.org/?p=3491)",
    "[https://www.imf.org/wp-content/uploads/2015/02/egypt.jpg](https://www.imf.org/wp-content/uploads/2015/02/egypt.jpg)"
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