What have been the effects of the fuel subsidy reforms on the energy sector, and has it impacted other areas of the economy?
HESHAM EL AMROUSSY: Energy subsidies have long been a part of the social contract in Egypt, and indeed the region, for many years. It has also put a very real burden on the country’s budget, which is already in deficit. The Egyptian economy required many reforms, but one of the most critical was subsidy reform, and the process began almost as soon as President El Sisi took office in mid-2014. The second wave of reforms came in November 2016, which was then followed by another wave later, in June 2017. This progress speaks of a strong political will and a steadfast commitment to face one of the main challenges crippling the economy. Subsidy reform permits the market to reach higher levels of economic efficiency through demand rationalisation. Moreover, it allows the government to redirect funds to boost other vital sectors of the economy, and aid the less privileged by improving other aspects of the social safety net. The subsidy reform policy has been well received by the business community both within Egypt, and internationally, by the IMF, the World Bank and international credit rating agencies. This has translated into improved investor confidence. Overall, the fuel subsidy reform was a necessary move, and I think many would agree that it was time.
What have been some of the challenges faced, and how has the state responded?
EL AMROUSSY: There have been economy-wide challenges. However, clear priorities and objectives are embodied in Egypt’s 2030 sustainable development strategy. This multi-dimensional strategy includes both economic and social goals, whereby social reforms would be established in tandem with higher economic growth rates. Creating jobs and improving living standards are among the most pressing challenges. The government embarked on unprecedented socio-economic reforms to restore the stability of the country’s finances, promote growth and employment, while shielding lower-income households from the adverse effects of the changes. This included structural reforms to unlock the potential of the Egyptian economy at large. For instance, the parliament has approved a new investment law, aimed at improving the business climate. Moreover, the parliament passed a law for deregulating the natural gas market. This is expected to attract greater private sector participation in the country’s rapidly expanding gas sector. After more than a year since the launch of the economic reform programme, signs of progress are giving substance to hope that the economy is being fundamentally reformed. The GDP growth rate is strengthening, the government has trimmed the budget deficit, the liberalisation of the exchange rate has eased shortages in foreign currency and the inflation is on a downward trend. Unequivocally, the oil and gas sector stands to offer the economy a significant boost.
How do you see the development of the energy sector over the coming years?
EL AMROUSSY: Egypt, with a population of 100m and growing, a strategic geographical location, and the unprecedented macro socio-economic reforms, is poised to achieve an annual GDP growth rate of 7%, a target set by the sustainable development strategy. This will create further demand for energy and emphasise the importance of this sector. Therefore, Egypt is modernising its oil and gas sector through a comprehensive strategy, aimed at securing the country’s energy needs, adding value to its hydrocarbon resources and developing its human resources. The strategy includes positioning Egypt as a regional hub for oil and gas trade. ExxonMobil Egypt has been a part of the country’s growth for over 115 years, and we are highly encouraged by the bold moves taking place in the economy, especially the modernisation of the oil and gas sector.
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