Egypt expands economic stimulus plan

CAIRO (Reuters) – Egypt is planning a second 30 billion Egyptian pound ($4.36 billion) economic stimulus package, Finance Minister Ahmed Galal said on Monday, up from a previously slated 24 billion pounds.

The first stimulus package unveiled by the army-installed interim government was 29.6 billion pounds. The spending is designed to revive an economy hit by nearly three years of political turmoil.

Supported by $12 billion in aid from Gulf states, the government has said the second stimulus package will begin in January. The government launched the first package after it came to power in July following the army’s removal of President Mohamed Mursi amid mass protests against his rule.

Galal told a news conference the new package would be spent partly on public investment and partly to finance a public sector minimum wage. He said the funds would come from Gulf aid and from savings.

Egypt’s economy grew 2.1 percent in the year to June 30, far below the 7 percent level it managed for several years before the 2011 uprising against former President Hosni Mubarak. Since then, political turmoil has scared off investors and tourists.

Seeking to get the economy moving, the authorities have cut interest rates three times by a total of 150 basis points since Mursi’s removal. The last cut of 50 basis points was on December 5.

But inflation is also soaring, last month touching its highest annual rate in nearly four years.

Critics argue the government could do more to help the economy by cutting corporate tax rates, which were increased during Mursi’s year in office.

“If the government is really serious about changing sentiment and boosting private sector investment, they should take that Muslim Brotherhood tax rise away,” said Angus Blair, chairman of business and economic forecasting think-tank Signet.

($1 = 6.8867 Egyptian pounds)

(Reporting by Asma Alsharif and Shadia Nasralla; Writing by Tom Perry; Editing by Alistair Lyon)

Egypt expands economic stimulus plan