February 16, 2017
Continued Focus on Economic Reform in Egypt’s Cabinet Reshuffle
By Elissa Miller
The reshuffle included a total of nine ministers, and affected the ministries of Education, Higher Education, Transport, Local Development, Supply, International Cooperation, Investment, Parliamentary Affairs, Agriculture, and Planning. The heads of key ministries, including the ministries of Defense, Interior, Foreign Affairs, Justice, and Finance, remained unchanged. Media reports suggested that the ministries of health, culture, and religious endowments would see changes, however those posts also went unchanged.
International Cooperation and Investment
One of the major changes in this cabinet reshuffle was the merging of the Ministry of Investment with the Ministry of International Cooperation, the latter which Sahar Nasr has led since September 2015. Nasr will head the newly merged portfolio. Former Investment Minister Dalia Khorshid departure from the cabinet came as somewhat of a surprise. Leading up the reshuffle, there were reports that she might head a new ministry resulting from the merger of the Ministry of Investment and part of the portfolio of the Ministry of Trade and Industry.
A sovereign Ministry of Investment was a relatively recent development from 2014 when the portfolio was separated from the Ministry of Industry and Trade. Khorshid’s most recent priority as Minister of Investment had been the completion of Egypt’s anticipated new investment law. While slow, it seems progress was made under her leadership in moving the law forward. The new draft law was sent to the cabinet in late 2016 before being referred to the State Council, which sent the draft law back to the cabinet with comments asking for revisions. Khorshid welcomed the process, saying that the State Council’s notes will improve the draft law before it is submitted to parliament for approval. Progress was also made over the past two years in terms of investment. In 2015, foreign director investment (FDI) grew by 49.3 percent, and FDI net inflow during the first quarter of the current fiscal year rose 35.7 percent year on year from $1.4 billion to 1.9 billion. Egypt aims to attract a total of $15 billion in foreign investment over the next three years. Egypt also approved a new bankruptcy law in January that aims to spur investment.
For her part, Nasr has been leading the charge to secure grants for Egyptian development projects from international financial institutions and international allies, a focus that will continue into this year. The merging of the investment portfolio under Nasr’s purview will allow the minister to better coordinate among major donors at a time when the country needs to grow investment and external funding. Following the cabinet reshuffle, Nasr said she would spare no effort in speeding up the implementation of the new investment law and attracting local and foreign investment. Under her watch, Egypt signed a $3 billion loan agreement with the World Bank to support the country’s reform program (at the end of 2016, the bank’s portfolio in Egypt included 25 projects and a total commitment of about $8.5 billion), a $1.5 billion loan agreement with the African Development Bank to support the country’s budget, and a $12 billion loan agreement with the International Monetary Fund. Nasr has also worked to secure funding for development projects in Egypt, and she recently said that her ministry is setting up permanent channels of communication with international partners to prioritize the financing of such projects.
Another shakeup and merger occurred in relation to the Ministry of Supply. Ali Moselhy replaced Major General Mohamed Ali El-Sheikh as Minister of Supply. The new Ministry of Supply and Domestic Trade pulls a portfolio from the Ministry of Trade and Industry, now the Ministry of Industry, which will remain headed by Tarek Qabil. Moselhy, a businessman who served as Minister of Social Solidarity under former President Hosni Mubarak and had close ties to the now-defunct National Democratic Party, most recently served as head of parliament's economic affairs committee.
A scandal took down El-Sheikh’s predecessor, Khaled Hanafi, who resigned in August amid major accusations of corruption in wheat procurement. El-Sheikh, the former head of the armed forces’ public services division, was soon named to replace Hanafi. El-Sheikh's brief tenure as Supply Minister witnessed a severe sugar shortage following new regulations imposed by the ministry on the distribution of sugar. During the crisis, the government seized sugar stocks from one of the country’s major food producers and charges were pressed against a number of traders for hoarding sugar and pushing up prices. Days ahead of devaluing the country’s currency, the Supply Ministry raised the price of subsidized sugar by 40 percent. El-Sheikh’s tenure also saw shortages of critical goods including rice and medicine.
As Minister of Supply and Domestic Trade, Moselhy will manage Egypt’s food subsidy program and General Authority for Supply Commodities (GASC). Notably, Moselhi expressed skepticism regarding Egypt’s shift from commodity to cash subsidies due to previous dysfunction of the subsidy program. The shift in the government’s food subsidy policy from reduced prices to cash transfers is a major element of Egypt’s reform program and reportedly included in reforms urged by the World Bank. He takes office at a time when Egyptians are reeling from record-high levels of inflation. Following the reshuffle, Moselhy said he may reconsider the increase in prices of some subsidized goods including sugar and oil. The IMF has said it expects inflation to ease as the effects of the government’s reform program “wear off” and “so long as budget and monetary policies remain tight.”
The reshuffle also replaced Minister of Agriculture Essam Fayed with Abdel Moneim al-Banna, who had headed the ministry’s Agricultural Research Center. Three new deputies, Mohamed Abdel-Tawab, Mona Mehrez, and Safwat Abdel-Hamid, were also appointed to serve in the ministry with al-Banna.
The change in leadership to the Ministry of Agriculture comes after a major wheat crisis in 2016. Fayed’s ministry repeatedly enacted a controversial ban on wheat shipments containing ergot, a common grain fungus that can be toxic in large amounts, despite an international standard that allows for a minimal amount of the fungus in wheat shipments. The repeated shifts in Egypt’s ergot policy—the Ministry of Supply and the GASC were in favor of abiding by the international standard—confused traders and threatened the country's ability to import the crucial good as multiple cargoes of wheat were turned away. Egypt is the world's largest importer of wheat.
Al-Banna takes the lead of the ministry following two recent important decisions. Last month, Egypt announced it would streamline its import procedures and establish a registry of companies to inspect potential grain purchases abroad. The change is aimed at slowing down the process of wheat shipments to Egypt and avoiding the flip-flopping in 2016 that led to a sharp decline in imports. The government also announced that it would purchase wheat from local farmers at international market prices, hurting farmers used to higher prices from state subsidies.
Some members of parliament opposed al-Banna’s appointment due to allegations of corruption, which the new ministry denied. Following his confirmation, al-Banna said his top priority would be to promote the production of strategic crops and to support farmers by coordinating with other relevant ministries. He also emphasized the role that scientific research should play in driving the work of the ministry.
Minister of Planning Ashraf al-Araby was replaced with Hala El-Said, a member of parliament and processor of economics at Cairo University. Al-Araby, a former senior economist at the National Planning Institute, was appointed as Minister of Planning and International Cooperation in August 2012 under former President Mohamed Morsi. Among Al-Araby’s major decisions was the automation of public sector employees’ salaries in an effort to engage more Egyptians in the banking sector and a new civil service law New Minister of Planning Halal El-Said expressed respect for Araby and said that she will prioritize putting in place short-term plans to help the Egyptians adjust to the country’s economic reform measures and will work with other ministries to update services to the lower and middle income classes.
Elissa Miller is an Assistant Director at the Rafik Hariri Center for the Middle East.