Last month’s passage of a new constitution in Egypt brought about great uncertainty regarding the country’s democratic future. What is more, the lack of entrepreneur-friendly policies in the newly proposed economic reforms adds a similar level of uncertainty to the future of Egypt’s Entrepreneurs – whose small and medium enterprises account for 70 percent of the total economy.
This month, Egypt’s government resumed talks with IMF officials on as set of economic reforms which will help secure a $4.8 billion dollar loan from the international agency. Much of the reforms centre around austerity measures, encouraging a return of incoming foreign investment flows as well as quelling concerns from international markets.
As necessary as these reforms are in safeguarding against economic disaster, they do little to take advantage of the swelling entrepreneurial optimism that seems to be sweeping the country. The government could and should address the challenges that entrepreneurs face from regulatory/procedural burdens and inadequate levels of information and technology infrastructure.
The economic reforms, which ultimately must be a signed off by the IMF, offer the standard cocktail of measures, which combine prudent fiscal with conservative monetary policy. They include an austerity programme intended to decrease an eye-watering 10.4 percent budget deficit – this will reduce the debt burden on the taxpayer. An introduction of a value added tax (VAT) – from a general sales tax - and the reforming of energy subsidies, which will restore fair market principles and gain the government vital revenue for social programs (40 percent of the population live on less than $2 a day). Monetary policy will be geared towards reducing inflation and shoring up depleting currency reserves – the central bank announced earlier this month that they had enough reserves left for 3 more months of imports.