Finance
State mobilises resources to boost private sector as economic growth driver: Finance Minister – Dailynewsegypt
Finance Minister Mohamed Maait has reiterated President Abdel Fattah Al-Sisi’s commitment to implementing robust measures to ensure the nation’s economic, financial, and food stability, which are fundamental components of Egypt’s comprehensive national security strategy amidst the current global and regional challenges. These efforts aim to enhance the government’s capacity to elevate the standard of living for its citizens and fulfil their essential, developmental, and public service requirements.
Speaking at the economic forum organized by the Egyptian Association for Political Economy, Statistics, and Legislation, under the theme “Navigating the Egyptian Economy: Regional and Global Perspectives… Addressing Food Economy Challenges,” Maait highlighted that the ongoing global crises underscore the soundness of Egypt’s approach in harnessing collective efforts to bolster state capabilities. This is achieved by meeting strategic agricultural development goals, which include providing citizens with quality products at reasonable prices, thereby ensuring food security and shielding the nation from international and regional market volatility. This is in line with the political leadership’s initiative to broaden agricultural and food production projects aimed at self-reliance and boosting export figures, as well as maintaining sustainable strategic reserves of vital commodities for six months.
Maait added that the government has embarked on a series of reformative actions to reshape the economic landscape and foster recovery, prioritizing agricultural and industrial output and exports in the next phase. The state is fully committed to deploying its resources to fortify the private sector’s role as the main propellant of economic growth, ensuring a more robust structure and agility in adapting to both external and internal economic perturbations, as part of the economic reform agenda backed by the IMF and global development allies.
The programme, which is garnering increased investment interest, is predicated on sustained fiscal prudence, aiming to achieve a primary budget surplus of 3.5% of GDP and setting deficit and debt ratios on a declining path, with a debt ceiling not surpassing 88.2% in the forthcoming fiscal year. International credit rating agencies have conveyed optimism regarding the prospects of the Egyptian economy, recognizing the potential for more invigorating opportunities for local and international investors. They have favourably evaluated Egypt’s new economic direction and foresee a potential upgrade in the country’s credit rating in 2024.
The Finance Minister elucidated that the government is collaborating with investors to alleviate the financial load of fostering agricultural and industrial ventures by continuing the interest rate support initiative, offering financing provisions of approximately EGP 120bn for these sectors. The national treasury is allocating EGP 8bn annually to cover the interest rate differential for beneficiaries, alongside budgetary provisions in the upcoming fiscal year to assist farmers, reinforcing the agricultural domain and fortifying Egypt’s food system.
He noted that the Egyptian economy has been grappling with intricate challenges over the past four years, exacerbated by the succession of regional and global crises. These difficulties are further intensified by the severe consequences of the ongoing conflict in Gaza, tensions in the Red Sea area, and other forms of instability in the Middle East, coupled with the adverse effects of the conflict in Ukraine.
The geopolitical unrest and regional as well as international disputes have engendered a volatile economic environment marked by decelerated economic activities, diminishing growth and investment rates, and escalating inflation on both the global and domestic fronts. This has manifested in increased financing and developmental costs, particularly due to the central bank’s tightening monetary policies, rising interest and exchange rates, and elevated transportation and logistics expenses, leading to augmented production and import costs, as well as higher prices for essential commodities, food, and services, while also considering the ramifications of the COVID-19 pandemic.
Maait pointed out that the nation’s overall fiscal intake has suffered in the last four years, owing to reduced economic dynamism and the detrimental impacts of international and regional discord on certain economic sectors like tourism, manufacturing, exports, Suez Canal revenues, and foreign investments. Expenditures have surged to unprecedented levels to counteract the severe economic jolts and mitigate their inflationary impacts, with swift interventions and extraordinary social protection measures targeting the most vulnerable segments of society, including low and middle-income households, and bolstering the sectors most affected by the economic upheaval.
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The World Bank is ditching its commitment to steer 45 percent of its spending toward projects with climate benefits, after facing pressure from the Trump administration.
The move, announced Monday following a meeting of the bank’s board of directors last week, marks a victory in President Donald Trump’s effort to purge climate policies from U.S. foreign policy. His administration has described the target as “distortionary” and “nonsensical.”
The bank preserved its broader Climate Change Action Plan — of which the 45 percent target was a key metric — just days before it was set to expire at the end of June. In addition to directing money toward climate projects, the plan provides technical support for helping countries reduce their greenhouse gas pollution and adapt to rising temperatures.
“We will retire the 45% climate co-benefits target,” the World Bank Group said in a statement, noting that it had “done significant work in answering client demand and needs.”
The bank’s work on climate “is and will remain firmly client driven, supporting them in delivering on their own ambitions as set out in their national plans and NDCs,” the statement added, referring to the nationally determined contributions countries submit under the Paris Agreement.
The decision to drop the climate finance target follows months of pressure from the Trump administration. People with knowledge of the negotiations said the U.S. was firm that the target must go despite other countries indicating their support for the bank’s climate goal. The U.S. has sway over the bank’s decisions as its largest shareholder.
Beyond the finance target, the Climate Change Action Plan also provides diagnostic reports on countries’ climate and development goals and aims to align lending with the Paris Agreement, which calls for preventing temperature rise from surpassing 2 degrees Celsius since the Industrial Revolution.
The bank said it would honor a board request to undertake an independent evaluation of the climate plan to determine if it’s helping countries grapple with rising temperatures. The decision effectively extends the plan beyond its expiration at the end of June.
The climate target was supported by many of the bank’s shareholders. It’s also been a prominent signal of the bank’s support for climate action at a time when the impacts of rising temperatures are accelerating.
“This is way, way away from where we should be for a responsible financial architecture,” said one official from a developed country who was directly involved in the negotiations and was granted anonymity to describe internal discussions.
The bank will continue to track and report on the amount of money going to projects with climate co-benefits. It exceeded its own target last year by directing 48 percent of its financing to climate-related projects.
Other climate targets embedded in agreements that govern different arms of the bank will remain, including one for the International Development Association, the bank’s fund for the poorest countries.
Multilateral development banks play a key role in global climate negotiations, where wealthy countries have committed to helping provide $300 billion a year for poorer countries by 2035. That no longer includes the United States, which has left the Paris Agreement and will exit the underlying United Nations Framework Convention on Climate Change early next year.
“Targets send enormous signals about an institution’s direction of travel,” said Clemence Landers, a senior fellow at the Center for Global Development. “At the same time, it’s a sign of the times and the World Bank is doing its level best to not rankle its largest shareholder.”
She believes the bank will continue financing renewable energy projects in countries that want them, despite having dropped its climate target.
“I wouldn’t be shocked if the bank continued to have an extremely robust clean pipeline with or without this target,” said Landers.
The bank says retiring the 45 percent target is part of its shift from a focus on “inputs to outcomes.” It will continue to monitor and report net greenhouse gas emissions across its projects and countries’ ability to withstand climate risks.
“We will continue to report to the Board on progress, including on climate co-benefits, and to contribute to our related joint MDB efforts,” the statement said, referring to its role as a multilateral development bank. “We will explore and discuss ways to better structure our engagement on adaptation, nature and pollution.”
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