Uh, say reform much? It would not be unfair to call 2015 a year of disappointments. Despite a promising start with the EEDC, the year was characterized by failed promises and flip flopping on the part of the government. Nonetheless, the delayed political transition of Egypt — itself a reason behind key policies being held back — was completed in January of this year when the House of Representatives first convened. It was time to take stock of what happened and go straight back to the drawing board, with the three words that would set the tone of the year being reform, reform, reform.

First off, a new cabinet was formed to oversee the reform agenda. Finance industry veteran Amr El Garhy was called up to head the Finance Ministry, in effect, making him the steward of the nation’s fiscal policy and the key cabinet minister overseeing financing of the reform agenda. He was joined by former World Bank economist Ahmed Kouchouk (who would help guide fiscal policy) and former PwC tax partner Amr El Monayer (in charge of taxation reform). OCI NV treasurer Dalia Khorshid was brought in to breathe new life into an investment policy that had largely lost its thunder. El Garhy and Khorshid joined cabinet veterans crucial to implementing subsidy reform including Electricity Minister Mohamed Shaker, Oil Minister Tarek El Molla, Supply Minister Khaled Hanafy (the latter of whom would be replaced by Mohamed Ali El Sheikh as a result of the wheat corruption scandal later in the year).

Only a few days after the team was announced, and under the mantra of “Yes, we can” (no footnote to Barack Obama) the Ismail cabinet announced its goals and came out in May with a new budget for the 2016-17 fiscal year. Highlights included a GDP growth target of 5.2%; a budget deficit of 9.8% of GDP; spending on social services was forecast to grow 12.5% to EGP 421 bn; EGP 46.3 bn earmarked for food subsidies; petroleum and fuel subsidies set to fall 43% from this year’s level to EGP 35 bn. The cabinet had also set the ambitious target of lowering the inflation rate to 9% by 2017-18. To achieve these, it would have to tackle:

• Taxation reform: this would be centered around implementing the value-added tax (VAT);
• Subsidy reform: centered around eliminating subsidies for moochers, while expanding social welfare for the poor;
• Spending cuts: cutting the fat of bureaucracy primarily through the Civil Service Act;
• Investment reform: dismantling the defunct investment policies of 2014 with new incentives;
• Energy reform: deregulating electricity and gas.

That was the basis of the plan with which the cabinet went to the IMF for a USD 12 bn extended fund facility in a bid to help the economy turn the corner. After much hemming and hawing, the IMF imposed third-party funding requirements (in part to help wean Egypt off of free GCC money which was squandered over the last two years) and a devaluation of the EGP, which finally came in the form of a full float in November. Egypt signed for the loan later that month.

How has the reform agenda fared this year? Better than the previous three years, simply because the cabinet got some of the toughest measures passed. The VAT was passed by the House in August after the Civil Service Act was approved a month earlier. Power subsidies were partially lifted when prices for top tier consumers were raised, with a five year plan set to eliminate them. Executive regulations for the Electricity Act, which would deregulate the electricity sector, were passed in May. Immediately following the devaluation, fuel prices were raised, while the Natural Gas Act, which would deregulate the market, slowly made its way to the House for a vote. The government began informing the freeloaders that their time was up, while the Investment Ministry drew up plans for a new law and instituted new incentives.

Having said that, implementation was not smooth at the outset, but appeared to gain steam as the year ground on — and as economic conditions worsened amid the FX crisis. Continued fear of the street’s reaction had delayed some policies, while others were a victim of a slow bureaucracy trying to keep up. The executive regulations for the value-added tax were a bit over two months late coming out, and key legislation on fuel subsidy cuts are still technically on hold. Growing pains from these reforms and the float took the form of a 19.43% rise in inflation as of November. However, considering how until September, most of the reform agenda was on paper, it is still too soon to tell. But by setting a direction and taking action, the die is cast. If the economy crawled out of 2015, 2016 was the year it stood up and took its baby steps.