CAIRO (Reuters) - Egypt’s prime minister said on Thursday he was working on a government restructuring that envisages a smaller cabinet and fewer civil servants to cut red tape and lure foreign investment.

FILE PHOTO - Egyptian President Abdel Fattah al-Sisi (R) shakes hands after the swearing in of Mustafa Madbouly, newly appointed Prime Minister, after Egypt appointed a new government on Thursday, at the Ittihadiya presidential palace in Cairo, Egypt, June 14, 2018. in this handout picture courtesy of the Egyptian Presidency. The Egyptian Presidency/Handout via REUTERS

Speaking at a U.S. business gathering in Cairo, Prime Minister Mostafa Madbouly said Egypt’s major challenges lie in chronic bureaucracy and a high birth rate.

Egypt, a leading regional ally of the United States, has been implementing deep reforms under a $12 billion IMF loan deal agreed in 2016 aimed at attracting foreign investment. Under the IMF deal, Egypt devalued its currency and has been gradually cutting fuel subsidies in moves that have deepened poverty.

The reforms have helped turn around the economy, with growth in the current fiscal year that began in July expected at around 5.2 percent.

But experts say the country needs to undertake major government restructuring and to curb its population growth rate if it wants to cash in on the economic reforms.

“We have a plan to reform the government,” Madbouly told U.S. businessmen.

“We are working now through the ministry of planning and…the ministry of telecommunications to a structural reform of the government,” he said. He added that he believed there was a need to cut the number of cabinet posts in the government and “at least 38 percent of employees in the public sector will be retired in the next 10 years.”

“So this means at least 35-38 percent will be retired and our plan to replace them is very hard,” he said.

Madbouly said that the restructuring proposals were linked to plans to move the seat of government to a new administrative capital under construction some 45 km (28 miles) east of Cairo scheduled for next year.

Starting at the beginning of 2019, Madbouly said many government services will be available online.

Madbouly, appointed in June after President Abdel Fattah al-Sisi began his second term in office, also said that population growth in Egypt was another leading challenge.

The country is already the most populous in the Arab world with nearly 100 million citizens and is expected to reach 128 million by 2030 if fertility rates of 4.0 births per thousand women per year continue, according to government figures.

Madbouly said his government was working on a plan to curb the country’s birth rate. “We don’t have any other option,” he said, without giving any details.