Egypt on course to beat 7.1% economic growth

Egypt is on course to beat last year's 7.1% economic growth despite indications of an international slowdown, finance minister Youssef Boutros-Ghali said.

Boutros-Ghali also told newswire Reuters on the sidelines of the World Economic Forum that Egypt plans to issue a eurobond around mid-year, probably of 5 billion Egyptian pounds with a 10-year maturity.

"I not only plan to match [last year's growth], I plan to exceed it," he said. "With the setback in the world economy and all this talk about recession and stagnation we may not be able to do 7.5% - but we will do more than 7%."

Growth in the last two fiscal years ending in June has reached 6.8% and 7.1%, up from 2% or 3% in the years before that, Boutros-Ghali said.

He predicted investment from oil-producing Gulf Arab states would remain strong, and said there was no sign yet of a slowdown of sales to Egypt's main export markets in Europe.

"The Gulf investments are no longer into real estate, they go into factories, into construction, into hotels," he said.

Boutros-Ghali said Egypt was in the process of registering with the US Security and Exchange Commission (SEC) and with Euroclear to facilitate bond issues.

"What we intended was to start [the SEC] registration process this month... And do also similar registration in Euroclear so we access the European market," he said.

"And then, at our convenience, probably in early summer, issue the instruments we have."

He said he expected to issue a bond around mid-year with roughly the same value as last year's 6 billion pound bond, payable in US dollars and with a 10-year tenor.

Boutros-Ghali said Egypt's inflation rate, at around 7%, was not a brake on a programme of economic liberalisation which includes subsidy cuts, but said it did affect the process.

"More than slowing down the reform effort, it tends to reshape it," he said.

"Unfortunately... [inflation] affects lower-income groups and it affects standard of living, which forces us as much as we can to transfer resources to these underprivileged groups."

He said economic growth and privatisation receipts had helped fund support for Egypt's poorest sectors through wage increases and "social solidarity pensions".

The number of families receiving cash transfers had risen to one million from 650,000, he said. "And we intend next year to increase that to two million".

"So inflation is forcing us reshape the reform programme, not slow it down. We're proceeding forward with privatisation and with deregulation of the system," Boutros-Ghali said.

Egypt had taken steps to eliminate fuel oil and natural gas subsidies to industry within three years, "which means we are beginning to realign the major prices in our economy," he said.

Many Egyptians have grown impatient that growth has not translated into tangible improvements in living standards.

"The problem is Egyptian society, especially lower-income groups, have been waiting for this for very, very long... They want to see immediate results and that is something no economy in the world can deliver," Boutros-Ghali said.

Appealing for more time for the impact to be felt, he added: "You cannot in two years of fairly high growth solve all of Egypt's problems." (Reuters)

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