Egyptian Prime Minister Ahmed Nazif's government announced Wednesday sweeping tariff cuts on most imports in a move seen as consolidating reforms and the privatisation of the sluggish economy.
"This is the first major move by the government of Ahmed Nazif," Finance Minister Yussef Boutros-Ghali told a press conference.
The tariff cuts - from 14.9 percent to nine percent - will see state revenue drop by about three billion Egyptian pounds (460 million dollars) over the next 18 months, Boutros-Ghali said.
The "radical decision" announced by Boutros-Ghali come less than two months after the formation of the Nazif government and is seen here as a first step to reform Egypt's ailing economy in a bid to spur growth.
Boutros-Ghali expected economic growth over the next 18 months to rise by a further one to 1.25 percentage points as a result of the tariff cuts, which went into effect Wednesday, a day after Egyptian President Hosni Mubarak signed a decree for their go-ahead.
Egyptian growth is was 4.1 percent in the fiscal year that ended in June.
"The aim of this decision is to create an economic and legal climate that will guarantee a high level of operations of economic institutions" as well as to reduce product costs for Egyptian consumers, Boutros-Ghali said.
The tariff cuts apply to all imported goods, with the exception of alcoholic drinks, tobacco products and cars with an engine size greater than 2,000 cc. Cars whose engine size is under 1,600 cc will benefit from a cut in duty from 104 percent currently to 40 percent.
"Machinery, equipment, spare parts and products needed in the manufacture of parts needed in the technology and computer industry will also be exempt of tariffs," which previously ranged from six to 21 percent, he said.
Tariffs on consumer goods, namely meat, fish, powdered milk, rice and tea have also been reduced. That is expected to bring a sigh of relief from Egyptians who have been reeling from recent cost-of-living increases.
Egypt's latest moves brings it into line with demands outlined by the World Trade Organisation (WTO).
The tariff cuts "are an important and first step on the road to economic reforms" and will increase "the level of Egypt's industrial competitiveness because production costs will be lower," Boutros-Ghali said.
He also expected the move to help attract foreign investment in Egypt and therefore "turn around the wheel of the economy".
"Subsequently this will increase job availability and help reduce unemployment," he said.
Unemployment has been hovering around 10 percent, with 2.5 million people looking for work and 600,000 newcomers to the labor market each year.
Nazif's government - a mix of the old guard and pro-reform figures - was sworn in July with heavy expectations that it will turn around an ailing economy, spur investment and accelerate privatisations.
The deficit has been growing more swiftly than the gross domestic product. It stood at an estimated 370 billion Egyptian pounds (close to 60 billion dollars) in the last fiscal year.
Foreign debt, meanwhile, has hit 28.7 billion dollars, while inflation stood at 6.5 percent in 2003 and direct foreign investment slumped to 237 million dollars, one-seventh the level of 1999.
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