IMF: Time for Egypt to Keep Pedaling, for Everyone to be Like Mo Salah
“I think it’s time for everyone to be like Mo Salah,” David Lipton, first deputy managing director at the International Monetary Fund (IMF), referring to the "Egyptian King" on everybody’s minds.
Drawing on Mohamad Salah’s experience of shifting to the premier league to face international football competition, Lipton highlighted the importance of expanding competition in Egypt. “When we compete with each other, we both get better,” he said. “That’s the kind of competition that the Egyptian private sector needs to have.”
Lipton is in Egypt on a trip with others from the IMF, attending a conference in which IMF representatives as well as business and political leaders from Egypt and around the world have gathered to brainstorm successful strategies for economic growth in Egypt.
In the middle of its 12-billion-dollar support program with the IMF, Egypt has made it out of the “financial danger zone” it was nearing in 2016, said Lipton. The focus now is on making sure that stability turns into further growth. “The risk or pitfall that countries fall into is at exactly this juncture,” he asserted. “They feel as though they’ve accomplished what they need to accomplish and they relax. It’s a bit like riding a bicycle and deciding it’s ok to stop pedaling, but if you do that, eventually your bicycle slows down and starts to wobble.”
The main question Lipton tackled in his talk is how Egypt can work toward more dynamic, private-sector-led economic and financial growth. In the challenges the country is facing, however, Lipton sees a number of opportunities: “The same problem has the seeds of its own solution," he said.
Egypt’s major challenge, Lipton explained, is dealing with its huge young population and the 700,000 Egyptians entering the labor force every year, in addition to those that are unemployed or in the informal sector. “If the people who are unemployed or underemployed can be incorporated into the economy in the coming 10, 15 years to the same proportion that has been accomplished in other similar middle-income countries, the country could achieve growth of between 6-8 percent,” Lipton said confidently.
For Lipton, the only way to achieve job growth of this scale is to enhance opportunities in the private sector. And in order to leave room for private sector development, there should be clear delineations between the public and private sectors. He noted that there are relatively few new businesses in Egypt, pointing out that the businesses that do get started don’t grow quickly. “Business formation, business growth is clearly impeded by the lack of opportunity and the lack of competition,” Lipton said, citing a need for more competition, both domestically and internationally.
Even with all this work left to do, Lipton noted that one shouldn’t overlook how successful the Egypt’s IMF program has been. He underlined the major steps toward stabilization that the country took at the very beginning, getting ahead of major financial challenges to steer clear of the “danger zone.” According to Lipton, economic stabilization has now set up the foundation necessary for the economy to really grow sustainably. “We shouldn’t underestimate how important the accomplishments have been,” he said. “Many countries never get this far.”