Egypt said it had slashed customs duties and streamlined tariff categories on Wednesday to ease basic food prices and stimulate the economy by reducing bureaucratic delays and industry's import costs.
Finance Minister Youssef Boutros-Ghali said cutting average customs tariffs to nine percent from 14.6 percent would reduce customs revenues by 3 billion Egyptian pounds ($482 million) a year but said this would be offset by renewed economic activity.
Boutros-Ghali took over the finance portfolio in a July cabinet reshuffle which aimed to breath new life into the Egyptian economy that has struggled to keep pace with the country's fast expanding population, now 70 million.
Investors have in the past criticised high tariffs for encouraging uncompetitive local industry and complained of complicated customs procedures. The previous government came in for sustained popular criticism after a currency devaluation last year drove up basic imported food prices.
Under the revised customs regime that came into effect on Wednesday, the number of categories for assessing duties has been reduced to six from 27.
Such a reduction had been planned by the previous government although it was to have happened in stages, but Boutros-Ghali - a survivor from the old cabinet - indicated a new urgency.
"We have accelerated the process and we went straight to six," he told reporters.
"The impact on the economy is going to be twofold, one the alleviation of the bureaucratic burdens that customs used to impose on imports, especially productive units," he said. Boutros-Ghali said reducing the bureaucracy would add 1/4 to 1/2 a percentage point to growth in gross domestic product. In addition, he said the tariff reduction itself would add one to 1-1/4 percentage points by boosting industry and other activity.
"This can happen over a period from 12 to 18 months, it depends on how responsive the economy is to the stimulus."
While customs revenues would fall to about 10 billion pounds a year from 13 billion, Boutros-Ghali said other tax revenues would climb as the economy rebounded.
Egypt's economy grew by more than four percent in the financial year to June 2004 and officials say it could be five percent this year. But economists say Egypt needs six percent or more to create enough jobs for its youthful population.
The government has yet to outline a detailed strategy for reviving the country's economic fortunes, but comments from the prime minister down, point to a new-found reforming vigour that evaporated in the late 1990s. Investors are still keen to hear about the fate of the foreign exchange market, after last year's botched currency flotation, and privatisation, which the new government has hinted would be revived after running into the sand.