World Bulletin / News Desk
Egypt's new prime minister said on Sunday he was finalising an economic reform plan that would rein in hefty subsidies and said the economy is expected to grow in the current financial year by 3 to 4 percent or more if investment goals are achieved.
Hisham Kandil told Reuters in a rare interview that the government aims to cut the budget deficit, now running at about 8 percent of gross domestic product, by 1 percentage point in two years although he said that target was "dynamic".
Egypt has been on the ropes since foreign investors and tourists, two vital cash streams, fled after the uprising that toppled Hosni Mubarak last year. The revolt gave Egypt its first freely elected president, Mohamed Mursi, who appointed Kandil in July.
Once a darling of frontier market investors with growth of about 7 percent a year, the economy has sputtered along, growing just 2 percent in the financial year that ended in June.
Determined to draw in investors who want to see hefty cuts in fuel subsidies and other reforms, Kandil's cabinet also has to sell economic restructuring to Egypt's 83 million people, many in dire poverty and desperate to see the benefits of the revolt.
"For this year, we hope that we will get around 3 to 4 percent (growth) and after that we will jump to 4, and then 4-5, and hopefully in a few years we will come to 7 percent," the 49-year-old said, adding Egypt could hit 7 percent in four years.
Kandil said his government was finalising its economic reform programme and the draft would be reviewed next week with President Mursi.
Kandil said the government wants to make fuel and other subsidies more targeted and a coupon or smart card system to ensure the poor, rather than everyone, received subsidised butane cooking gas was expected to start in October.
There will also be cuts to gasoline subsidies in the coming months, he said, adding that these measures were part of efforts to reduce the budget deficit by 1 percentage point in the next two years, although he said targets would depend on what the population could tolerate.
"Those targets are dynamic. We have to look at what kind of support we will get and how the people will react to these measures," he said. "I am sure many of them will react positively, but of course we might have some difficulty so it will be a flexible thing too."
He said that after the president had reviewed the reform plans, there would be a public consultation about the programme. "Hopefully by the beginning of October we will open this for discussion. That also stands true for the IMF programme," he said.
He was referring to a request for a $4.8 billion loan from the International Monetary Fund, part of a bid by the government to shore up its finances after foreign reserves plunged to about $15 billion, about half their level before the revolt.
Responding to investor concerns that the Egyptian pound could be devalued, Kandil said the central bank was managing the currency in a flexible way but said investors should not delay.
"So investors should not wait for the pound to devalue. This is not going to happen soon. So now is the right time to get into the market," Kandil said, echoing comments made by the president to Reuters last month.
Meanwhile Kandil said the government needed to boost revenues as well as cut spending through more targeted subsidies, by casting the tax net wider.
"We need to look at our taxation system so it covers more people, not necessarily that we tax more. But it would be better to tax more people," he said. "We'll try to get them into the formal economy, and we will do that very soon."
Volatility eased as traders focused on the world economy and corporate earnings after a week dominated by the dramatic spike in tensions over North Korea, which triggered a global sell-off before prices bounced back Monday.
Investors greeted the more conciliatory tone after US stocks dropped three days in a row last week on President Donald Trump's vow of "fire and fury" if North Korea continued to pursue its nuclear weapons and ballistic missile programs.
The ultra-conservative kingdom has moved to diversify its traditionally oil-dependent economy following a sharp fall in crude prices.
In its monthly report on the global oil market, the International Energy Agency said, however, that it believes the supply glut is easing, partly because demand is growing faster.
US stocks have been in retreat since President Donald Trump Tuesday issued a fiery warning to North Korea to halt its nuclear program.
The move by one of Japan's best-known firms greatly reduces the chance of an embarrassing delisting from the Tokyo Stock Exchange (TSE).
London's benchmark FTSE 100 index weakened by 0.5 percent to 7,503.39 points.
The approval by the European Commission comes just over two months after the European Central Bank -- which took on the role of the eurozone's banking supervisor in 2014 -- allowed the sale to go ahead for a symbolic fee of one euro.
BP, Chevron, ExxonMobil, Shell and Total have all published results in recent days, showing they pocketed $23 billion in net profit in the first half fo the year.
Higher cereal, sugar and dairy prices pushed food price index by 10.2 percent annually in July
HSBC was also a big riser, gaining three percent at £7.65 ($10, 8.5 euros) in late morning trade after the British banking giant announced a share buyback plan alongside a rise in first-half profits.
Both main crude contracts made strong gains, with WTI testing $50 a barrel for the first time since late May and Brent heading towards $53, while mining giants BHP Billiton and Rio Tinto saw their share price rise as commodities strengthened.