Macro-Economic Stabilization and Reform Project - Year Two Annual Report

The project is designed to support the Government of Egypt's (GOE) reform efforts included in the GOE's agreement with the International Monetary Fund (IMF). The reforms aim to address macroeconomic imbalances that negatively impact the ability of enterprises to grow and become more competitive. The project has two primary objectives: Objective One, Improved Public Investment Planning, Implementation, and Monitoring to Enhance the Productivity of Public Capital Assets and the Efficiency and Effectiveness of Public Services; and Objective Two, Upgraded Effectiveness of Public Financial Management to Improve Fiscal Management, Budgeting, and Expenditure Control, and Promote Greater Budget Efficiency, Transparency, and Accountability. The primary counterparts to the MESR project are the Ministry of Planning and Economic Development (MPED) and the Ministry of Finance (MOF). The project engages with other stakeholders and counterparts, including parliamentarians, business associations, civil society organizations (CSO), other private sector representatives, as well as other GOE agencies and international organizations working in activities related to macroeconomic stabilization. MESR's objective activities are well-coordinated and flexible, leveraging one another to gain momentum for reforms and maximizing the potential for success and sustainability. In Year Two (Y2), the USAID-funded MESR project continued many of its Y1 activities, deepening their impact and sustainability within Y2. The project supported the development and implementation of the GOE's annual Sustainable Economic Development Plan, which guides the overall investment project planning, appraisal, implementation, and monitoring. To support project planning and evidence-based decision-making, MESR continued to strengthen the Integrated System for Investment Plan Preparation and Monitoring (ISIPPM), with over 10,300 projects entered into the automated system in fiscal year 2019/2020. MESR's trainings on ISIPPM are estimated to have improved ISIPPM data entry by more than 70 percent. MESR also strengthened the ISIPPM's IT security system and overall functionality. The project supported modeling and evidence-based analysis by building MPED's internal capacity for the use of different modeling systems, such as Computable General Equilibrium (CGE) and System Dynamics. This type of modeling strengthens MPED's ability to incorporate public investment priorities and determine the forecasted impacts of these investments. To further support evidence-based decision-making, MESR introduced MPED staff to the importance of capital investment appraisal and the use of cost benefit analysis (CBA) by presenting international experiences and toolkits. Another critical component of evidence-based decision-making includes fiscal risk. In Y2, MESR provided trainings on fiscal risk to officials from multiple MOF and MPED units. Unanticipated revenue shortfalls or expenditure increases drive fiscal risks, put pressure on the government budget, increase deficits and public debt, and contribute to macroeconomic instability. With recent challenges facing the Egyptian economy, including the COVID-19 pandemic causing increased fiscal risk, MESR's support to improve the GOE's ability to mitigate fiscal risk is more important than ever. To further manage fiscal risk, MESR continued its support to increase the viability of public-private partnerships (PPP) as an alternative financing mechanism. This included organizing workshops aimed at building the capacity of staff from the MOF PPP Central Unit and the MPED Feasibility Studies and Partnership Unit, and other associated stakeholders. The project also supported the development of a PPP framework, which will guide the implementation of PPPs in Egypt.