December 28, 2016 / 12:44 PM / a year ago

Tough Egyptian economic conditions will improve in six months, says Sisi

CAIRO (Reuters) - President Abdel Fattah al-Sisi said on Wednesday that tough economic conditions in Egypt would improve in six months and called on businessmen and investors to help the government curb price increases.

Egyptian President Abdel Fattah al-Sisi delivers a speech during the "Egypt's vision 2030" meeting on sustainable development in Cairo, Egypt, in this February 24, 2016 handout picture courtesy of the Egyptian Presidency. REUTERS/The Egyptian Presidency/Handout via Reuters

Speaking at the opening of a fish farm project in the Suez Canal city of Ismailia, Sisi praised Egyptians for the way they had dealt with harsh economic reforms.

“The efforts to alleviate those effects are massive,” he said.

Egypt took markets by surprise on Nov. 3 when it abandoned its pound currency’s peg to the dollar in a move aimed at attracting capital inflows and weakening a currency black market that had all-but displaced the banks.

Hours later, the government hiked fuel prices.

The flotation helped the cash-strapped government clinch a $12 billion IMF loan programme it hopes will revive growth hampered by political uncertainty since the 2011 uprising that ended Hosni Mubarak’s 30-year rule.

Sisi came to power promising economic reform and stability but problems have piled up. With a budget deficit of 12 percent and a looming funding gap, he was forced to undertake harsh economic measures.

Egyptians, many of whom are forced to scrape by from day to day, feel hard-hit by tax rises, soaring food price inflation, and cuts in state subsidies. Prices in the most populous Arab country are likely to keep rising next year, economists say, driven by the reforms.

The main measure of inflation is at eight-year highs above 19 percent, as a foreign exchange shortage and a rise in customs duties bite hard in a country that imports everything from sugar to luxury cars.

Egypt raised electricity prices by 25 to 40 percent and introduced a 13 percent value-added tax in August.

In his speeches, Sisi has sought to persuade Egyptians that collective sacrifice is necessary to save the country from financial ruin.

In Wednesday’s speech he ordered the government to make greater efforts to curb price increases and asked businesses and investors to play their part.

“I am not just telling the government, I am also telling citizens, businessmen, and investors: please stand beside your country Egypt for just six months and you will find things much better than they are now.”

Reporting by Omar Fahmy; Writing by Ahmed Aboulenein; Editing by Giles Elgood and John Stonestreet

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