Mohamed Seif Eldin-Cairo

On August 8, Egypt received $ 2 billion from the International Monetary Fund (IMF), the sixth and final tranche of a $ 12 billion loan it obtained in November 2016, in return for several economic reforms in the country.

With Cairo receiving the last tranche of the loan, several questions arise on the Egyptian arena about the success of the economic reform program in reviving the Egyptian economy, as well as when Egyptians will reap the benefits of such reform after the burdens of the last three years of increasing prices and reducing subsidies.

Measuring the success of the Egyptian economic reform program or not is not as easy as some imagine, as it needs a comprehensive view of all economic sectors in the country, and this is difficult in the absence of reliable official or unofficial data.

The economic reform program developed by the Egyptian authorities in cooperation with the International Monetary Fund has four main objectives: "to control the value of the local currency (pound), increase exports, increase foreign investment, financial control or reduce the deficit of the state budget," according to experts of the island. Net.

My time improved
The currency exchange rate is at the center of the economic reform program, as the central bank decided to liberalize the pound against the dollar on November 3, 2016.

Before the "floating" decision, the exchange rate was about 8.88 pounds to the dollar, and touched after 18 days, to settle at 16.50 pounds to the dollar.

According to the economist Dr. Ahmed Zekrallah, "the performance of the Egyptian pound actually improved after the floating decision, as it was suffering badly before the economic reform program. Because of about seven billion dollars to dig the Suez Canal. "

He explained in an interview with Al Jazeera Net that this improvement stands at the start of Egypt's repayment of its debts, pointing out that Egypt suffers from a huge gap in the foreign exchange sector is about 45 billion dollars.

As for the reason why the pound continued to maintain its value against the dollar during the last period, God attributed this to the decision of some Arab countries in support of the Egyptian regime - such as the UAE, Saudi Arabia and Kuwait - to postpone the repayment of Egypt's maturities of deposits and loans obtained during the last period.

The Minister of Finance, Dr. Mohammed Maait - in statements during the last month - that "his country can in the next two years to eliminate debt permanently."

Egypt's debt rose from 2.6 trillion pounds in the fiscal year 2016-2017 (year of flotation), to four trillion pounds (the dollar equivalent of 16.50 pounds) during the current fiscal year, based on the figures of the state budget. Debt interest rose from 316 billion pounds to 570 billion during the same period.

Egypt's fiscal year starts early July until the end of June of the following year, according to the budget law.

At the expense of the citizen
After adjusting for the exchange rate and improving the pound's performance against the dollar, the budget deficit remains the second pillar of the economic reform program.

The budget deficit improved significantly, but was supported by an increase in taxes and a reduction in subsidies and services to Egyptians.

During the current fiscal year, the state budget cut petroleum subsidies by 40 percent and electricity by 75 percent.

During the economic reform program, Egypt raised the prices of petroleum and electricity four times, most recently in July.

For example, after "flotation" the price of 80 liters of gasoline (the most consumed) jumped from 2.35 pounds per liter to 6.75 pounds, which reflected on the negative prices, and caused large waves of high prices.

The austerity measures taken by Egypt as part of the economic reform program led to a significant increase in poverty rates, reaching 32.5% during the fiscal year 2017-2018, including 5.3% in extreme poverty due to high prices, up from 27.8% in the fiscal year 2015-2016. According to government estimates.

However, the World Bank estimates earlier this year that "about 60% of the population of Egypt is either poor or vulnerable to poverty."

Foreign investment
During the economic reform program, the Egyptian government relied heavily on attracting more foreign direct investments, especially after the "floating of the pound." However, there has been no significant improvement. The volume of foreign direct investments in Egypt has varied during the past years, between ups and downs.

During FY 2016-2017 (year of flotation), foreign investments recorded about $ 7.9 billion, down to about $ 7.7 billion at the end of last fiscal year 2017-2018, while the government aims to reach $ 10 billion during the current fiscal year.

"The main reason for the decline in foreign investment in Egypt is that the security and military institutions dominate the economy, which makes Egypt a repelling environment for foreign investors," said economist Saadeddin Hussein.

Since the overthrow of the late President Mohamed Morsi in the summer of 2013, the role of the military establishment in Egyptian economic life has been growing. Estimates vary on the size of the military's role in the local economy. Not more than 3% at most.

Meanwhile, Professor of Economics at Mansoura University (North Egypt) Mohamed Al-Said pledged the return of foreign direct investment in Egypt to the recovery of domestic demand and increase consumption.

He explained - in his talk to the island Net - that "most foreign investors were resorting to Egypt because of the increase in population and high consumption, but with the weak purchasing power of the Egyptian pound and lack of consumption, investment is no longer feasible, especially in light of the difficulty of export."

Where are the fruits of reform?
As for the reasons Egyptians have not felt the economic reform measures so far, economist Dr. Mahmoud Talaat believes that the increase in inflation rates and the high prices of goods and services provided to citizens prevent this.

On the other hand, Chairman of the Committee on Energy and Environment in the House of Representatives (parliament) Talaat Suweidi that the Egyptians have begun to reap the benefits of economic reform, saying "Look at the increase in wages and pensions."