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Al-Ahram Weekly 27 April - 3 May 2000 Issue No. 479 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 27 April - 3 May 2000 Issue No. 479
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Special Features Travel Living Sports Profile People Time Out Chronicles Cartoons Letters People's Assembly rounds on Ghali
By Gamal Essam El-Din
As the closing session of the People's Assembly's five-year term nears its end, MPs are taking the opportunity to lash out at a number of existing and former government officials. In last week's sittings, MPs launched a fierce attack against former prime minister Kamal El-Ganzouri, blaming his administration for the mounting budget deficit and for involving the country in costly mega-development projects.
In this week's sittings, MPs singled out Economy and Foreign Trade Minister Youssef Boutros Ghali as their chosen target. Less than a month ago, Ghali faced a barrage of criticism for pursuing policies which favour imports over local production in basic commodities such as sugar, steel and fertilisers. Economic policy was denounced as vague, and highly detrimental to the banking sector.
On Saturday, criticisms of Ghali reached a crescendo. Now, not only is the minister of economy blamed for aggravating recession and the squeeze in liquidity, he is accused of a number of "irregular" acts. Some of these attacks are of a purely political nature, with MPs charging that he is retaining too many economic powers in his own hands.
A member of the Wafd Party, Ayman Nour, accused Ghali of deliberately evading a parliamentary interpellation -- a question which must be answered -- on Saturday. The interpellation was postponed with the excuse that it had been submitted without prior scheduling. Nour, though, insists the interpolation should have been discussed since it deals with pressing issues, including the "market recession, the squeeze in cash liquidity, commercial bankruptcy, drastic fluctuations in the dollar exchange rate and corruption in the banking sector". Nour also suggested he had documentary evidence of abuse of authority on Ghali's part, involving the purchase by close family relations of land in Hurghada in September 1998 for LE8 million, which the buyers intended to sell to Banque du Caire, just 18 months later, for LE180 million. A clear case, Nour alleges, of "profiteering through banks".
Refuting Nour's allegations two days later, Ghali vehemently denied that any of his family members was involved in profiteering activities. Ghali explained that his father, Raouf Boutros Ghali, had left the company which mortgaged the land in Hurgada to Banque du Caire, months before the bank decided to assess the land value. The land was assessed in April 1999, while Ghali's father had left the company in February of the same year.
Nour, though, had concentrated his attack on Ghali's alleged failure to get the market out of its current recession. "This recession has been around for a year now, and still it is unclear if the Economy Ministry has any clear policies to combat it," Nour told Al-Ahram Weekly. As a result of the policies pursued by Ghali, Nour charged, the market is being deluged by torrents of cheap imports. This, he argued, has led to the accumulation of vast unsold inventories.
Nour found supporters across the political spectrum. Mohamed Abul-Enein, an appointed MP and prominent businessman, pointed to the increase in the value of the unsold inventory, which has risen from LE6 billion to LE7.2 billion in just 18 months as one of the clearest indicators yet of the depth of the recession.
"Surely this must alert economic decision makers that they are in dire need of stimulating demand on the local market and encouraging mass production," said Abul-Enein.
Mustafa El-Said, a former economy minister, argued that the recession was a result of the vast sums of money squandered on long-term mega-development projects. "A lot of businessmen, merchants and industrialists now complain of debt insolvency because of the market recession and the squeeze on cash liquidity, while ordinary citizens ignored the winter sales completely, a result of there being too little purchasing power in the country." He argued that the recession has adversely affected small investors in the stock market and constituted one of the main reasons behind the slowdown in the privatisation programme.
Was it predictable that Mahmoud Abul-Nasr, chairman of the Planning and Budget Committee, should blame the previous government for exacerbating the liquidity squeeze and market recession?
"Atef Sedki's government," he said, "succeeded three years ago in achieving the first phase of economic reform. This included generating high revenues for the state treasury through effectively imposing a sales tax and levying a variety of fees. El-Ganzouri's government failed to channel these revenues [estimated at LE50 billion] into fast-return productive activities. Instead, it indulged in the simultaneous implementation of a series of costly mega-development projects. As much as LE2.5 billion has been spent on Toshka alone. The present government is now forced to shoulder the burden those decisions, not to mention the ballooning of domestic debts to LE147 billion," said Abul-Nasr.
Redrawing plans
During the discussion of the 1996/1997 balance sheet in parliament two weeks ago, you surprised MPs by accusing the previous government of mismanagement on several fronts. Why?
My attack on the previous government should not be seen as stemming from any personal reasons. During preliminary debates in the committee, we were shocked at the number of unconstitutional acts committed by the previous government. It is customary that economic authorities receive additional budgetary allocations -- the Assembly used to approve extra allocations as long as they remained within acceptable levels. The former government, though, unlike its predecessors, endlessly approved unlicensed budgetary allocations to the state authorities. This led to the aggravation to the budget deficit which climbed from LE3 billion in 1994/95 to LE4.6 billion in 1997/98.
This climb naturally sounded alarm bells. The present government, though, has promised that the preparation of the new budget will be marked by greater transparency and that the budget allocations approved by the Assembly will be stuck to, public spending will be kept in check and comprehensive tax reforms introduced.
It is clear that the deteriorating performance of economic authorities was a major issue in the committee's debates this year. Does this relate to Prime Minister Atef Ebeid's announcement that the budget of these authorities will be separated from that of the state?
This is true to some extent. Members of the committee, however, think that it is high time that some solution to the problems of the authorities be found. This is a basic part of the economic reform programme. The economic authorities suffer from two major problems -- they have been required, since the sixties, to sell goods and offer services at subsidised prices, policies no longer acceptable in a market economy. They were also required to contribute to funding and implementing mega-development projects despite the fact that many authorities were unable to fund any such role. The authorities, consequently, had to resort to excessive dependence on loans and unlicensed budgetary allocations.
In the new budget the economic authorities will receive as LE3.3 billion to help correct such financial imbalances and repay a portion of their debts. The Finance Ministry, for instance, managed to reschedule the debts owed by the Radio and Television Union to the National Investment Bank.
It is good that a ministerial committee was formed to investigate the financial conditions of these authorities and start implementing the decision to separate their budget from the state budget. Some MPs suggested turning these authorities into holding companies or merging them into giant entities. The committee will discuss all of these suggestions.
Opposition MPs have made a lot of fuss about the ballooning of domestic debt to LE147 billion.
The new budget decided to allocate LE27.5 billion for the servicing of foreign and domestic debts in 2000/2001 compared to LE25.7 billion in 1999/2000. This is not quite as serious as the opposition claims. Prime Minister Atef Ebeid has stressed that these debts are covered by capital assets. Besides, most of these debts are owed to the National Investment Bank. This is a state-owned bank and its main function is to fund state development plans.
Despite the above, Minister of Finance Medhat Hassanein has vowed that the government will make every effort to reduce the public debt ceiling. This will entail the collection of an estimated LE17.6 billion in tax arrears, and the financial reform of the state authorities.
Most economists now agree the market is in the throes of a recession and liquidity squeeze. Do you agree?
There is general agreement that the market is now gripped by a recession, some of the blame for which must be placed on the former government. We urged the current government to inject the market with sufficient cash and the prime minister has promised that LE24 billion will be injected into the market at a rate of about LE2 billion per month. This will include repaying some of the estimated LE22 billion of government debt owed to contracting, electricity and cotton companies.
