Egypt: Mostafa Hopes Asset Sale Would Kickstart the Economy
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This week, we are discussing the economic crisis in Egypt following the recent sale of public assets. We also look at the ongoing protest in Kenya over tax hikes and rising prices.
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Egypt: Mostafa Hopes Asset Sale Would Kickstart the Economy
Last week, Egypt’s prime minister Mostafa Madbouly announced the sale of equity in several public-owned enterprises valued at US$1.9 billion, part of an estimated US$9 billion expected from the sale of public assets over the next four budget cycles.
The asset sales are a proviso by the International Monetary Fund (IMF) for a US$8 billion loan needed to revive the struggling economy. The IMF’s position is that reducing government ownership will increase efficiency and competitiveness in key sectors of the economy necessary to bolster economic recovery. The high level of government ownership in the economy dates to the 2013 coup when the military took control and needed to maintain a strong grip on economic and political power.
However, it’s unlikely that these asset sales would be enough to revamp the economy; there is still a lot to do:
Asset sales alone will not be enough to revamp the economy, given the dual threats of external debt and heightened global interest rates—higher interest rate means increases in debt service cost. In one estimate, debt service costs will exhaust 45 percent of government revenue in the current fiscal year.
Alongside these asset sales, the government must address its unsustainable spending inclination. In the last two years, the government has borrowed over US$40 billion. While most of this funding was spent on ambitious capital projects, arms supplies, and social protection programs, there is still a need to rein in government spending to more sustainable levels.
Another Wave of Disruption and Protests in Kenya over Tax Hikes
In our March edition, we discussed the beginning of a nationwide demonstration led by opposition leader Raila Odinga against the result of last year’s presidential election. Since then, the demonstrations have escalated into a series of violent protests, resulting in deaths, as well as numerous arrests across the country. The most recent protest was a three-day mass rally organized by the opposition coalition, with the aim of speaking out against the increasing cost of living and recent government tax hikes.
The new tax hikes are a result of provisions in the Finance Act that was passed by the government last month. The law raised the value-added tax on petroleum products from 8 percent to 16 percent, increased the business turnover tax from 1 percent to 3 percent, and introduced a 1.5 percent housing tax for salaried employees.
With incidents of violence, looting, and destruction of private and government properties in the past few weeks, the politically motivated demonstrations have continued to negatively affect businesses and have further derailed government efforts to improve the economy. As a security measure, the three-day protests were met with a heavy police presence, and there have been reports of teargas and live rounds being used to disperse the crowds. ?
It is crucial for both the government and the opposition to prioritize dialogue over disruption and adopt a more conciliatory approach to resolve their political conflict while addressing the real concerns of everyday Kenyans.
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In the News ?
?We're also tracking the latest current events in the news, and how they may affect the decisions of policymakers. Below are some of the latest developments.?
Health | Nigeria confirms first case of Anthrax
Nigeria reported its first case of Anthrax on July 17. According to the Federal Ministry of Agriculture and Rural Development, the first case of anthrax was detected in Niger state, which is close to the Federal Capital Territory (FCT). The case was confirmed by the National Veterinary Research Institute. This is the first reported case of anthrax in Nigeria, following report of an outbreak in Northern Ghana a few weeks ago.
International Cooperation| EU and Tunisia sign deal to fight illegal migration
The European Union (EU) and Tunisia signed a memorandum of understanding in Tunis on July 16th, establishing a comprehensive strategic partnership that encompasses economic development and renewable energies in the country. As part of this agreement, the EU will provide 105 million euros in aid to prevent the departure of migrant boats from Tunisian coasts to the EU and combat smugglers. Additionally, the aid will facilitate the return of Tunisians in irregular situations in the EU to their home country, as well as support the return of migrants from sub-Saharan Africa to their countries of origin from Tunisia. However, humanitarian groups worry that the deal could lead to severe rights violations instead of helping solve complex issues. The EU also aims to negotiate similar partnerships with Egypt and Morocco.
Economy | Zambia's economic growth expected to slow to 2.7% in 2023
According to a budget plan presented by the Ministry of Finance last week, Zambia's economy is expected to grow by only 2.7% in 2023, a decrease from 4.7% in 2022. This slower growth is attributed to contractions in the mining and energy sectors. Following its default on sovereign debt in 2020, Zambia has recently concluded a long-awaited debt restructuring plan with the International Monetary Fund (IMF). This restructuring is projected to save the country $7.65 billion by 2026. The budget plan, considering improved macroeconomic conditions and the implementation of reforms, forecasts a GDP growth rate of 4.8% in 2024, 4.3% in 2025, and 5.0% in 2026 for the country.
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