Cityscape in Egypt

Egypt Politics March 2018

Egypt: Incumbent President el-Sisi gears up for comfortable election win

Abdel Fattah el-Sisi is set to secure a second—and in theory final—four-year presidential term in elections due to take place on 26–28 March. His victory would mean political and economic continuity, with the government likely to continue implementing reform measures as part of the IMF-backed support program. The sole contender to el-Sisi is Moussa Mostafa Moussa, leader of the el-Ghad party and a supporter of the current president. Opposition leaders have denounced Moussa as a puppet candidate and have called for a boycott of the elections, and a series of other contenders were either arrested or dropped out due to intimidation. The election will take place against the backdrop of an economy which is gradually improving, with growth accelerating for the fifth straight quarter in October–December.

If reelected, el-Sisi will likely keep following the IMF program which has led to progress on several fronts since it was agreed on in November 2016. International reserves have surged, costly energy subsidies have been trimmed and reforms have been passed to enhance the business environment. However, these measures have increased hardships for many households faced with soaring prices. The next government will likely continue phasing out fuel and electricity subsidies—although higher oil prices could make this more difficult politically—and compensate for their withdrawal with greater social transfers. It would likely take further steps to rationalize government spending and rein in the public wage bill, as well as implement more business-friendly reforms.

The incoming government will face numerous challenges. With roughly 700,000 people set to join the labor market each year for the foreseeable future according to IMF, improving the labor market will be necessary to reduce already-high youth unemployment and boost female participation. Paring back the huge budget deficit to trim the hefty public debt is also key. The fiscal gap has thus far proved difficult to narrow, due to higher interest payments associated with tight monetary policy, and higher crude prices. As a result, in February, the government announced it was raising the 2017/18 fiscal deficit target to 9.4% of GDP from 9.0% previously. Measures recommended by the IMF include reducing tax exemptions, fortifying the tax administration and making the tax system more progressive to boost revenue.

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