25 - 31 January 2001
Issue No.518
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Al-Ahram Weekly On-line 25 - 31 January 2001 Issue No.518 |
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Ebeid sees a silver lining
Prime Minister Atef Ebeid, launching the annual marathon of parliamentary debates, outlined to the People's Assembly on Monday his government's strategy for upgrading the nation's socio-economic performance in the coming year.
Economic resurgence?: MP's listen to the details of the government plan to "modernize Egypt"
Delivering his cabinet's second policy statement, Ebeid spoke of four programmes for rectifying economic imbalances, addressing social inequalities, improving public services and ensuring sustainable development.
Against a backdrop of panic generated by severe economic recession and a dollar squeeze, Ebeid devoted a major part of his statement to outlining measures the government will take to restore stability to the exchange rate market. "The Central Bank of Egypt (CBE) is now solely mandated with managing the exchange rate situation on the market," the prime minister said. "In this connection, CBE officials have affirmed to the government that they will never resort to floating the Egyptian pound. They believe that this measure is completely unacceptable and unreasonable. But, at the same time, CBE officials will not resort to stabilising the Egyptian pound, because adopting an unrealistic fixed exchange rate for the pound has proved to be detrimental to national development purposes."
Outlining what appears to be a compromise course, Ebeid said that, as of this week, the CBE had started adopting a relatively fixed exchange rate for the dollar. "It is not a fixed rate in the true sense of the word, but it is a certain rate that will be adopted to bring stability to the exchange market," he said. "It will be calculated on the basis of the average exchange rates registered on the market for three weeks. Deals on the market will be allowed to move upwards or downwards within the range of two per cent from the adopted rate. The CBE will strongly intervene to prevent any market deals that are outside this range. I hope that I'm clear on this point so that all dealers on the market realise the importance of commitment to this rule and stop speculation [on the Egyptian pound]."
Ebeid urged private exchange firms to abide by the new measures. "It is in the interest of these firms to refrain from speculative action," he said. "The CBE, in collaboration with the economy minister, will be fully empowered to prevent any unlawful practices."
Part of Ebeid's "economic resurgence" plan focused on monetary and fiscal reform. The prime minister attributed the current economic recession more to international pressures than to internal economic imbalances. He said most of the world, with the exception of the United States, was suffering from the recession.
"Our programme to combat [recession].. is directed towards raising the competitive edge of the Egyptian economy and integrating it into the global market at a faster pace," he said. "Our measures to achieve this objective include rationalising public expenditures, reducing the domestic debt and improving the performance of public banks.
"Let me affirm that our public sector banks are so strong that the IMF asked us to contribute $100 million to an international fund for offering soft-term loans to poor countries. We are also in the process of drafting a new law for strengthening the supervision of the CBE over the banking sector."
In spite of last year's adverse world economic conditions, Ebeid said Egypt was able to reduce the inflation rate from 3.7 per cent to 2.8 per cent in one year. "This is unprecedented in 30 years. Moreover, the foreign debt has declined from $27.78 billion to $26.5 billion in one year," Ebeid said.
Ebeid said that newly-introduced investment incentives had reduced the deficit in the balance of trade by $2.053 billion. At the same time, export revenue had increased by $1.94 billion, while imports dropped by $1.3 billion.
In regard to the programme to address social inequalities, the prime minister announced an offer of direct subsidies estimated at LE7.98 billion to basic commodities and services. Next year, Ebeid added, the government would bring larger segments of society under the protection of the free health insurance system.
Another programme is dedicated to improving the performance of a number of vital public services. "A case in point is our concerted efforts over the coming three years to provide 3,975 Egyptian villages and 17 new housing communities with potable water, which will cost the government an estimated LE6 billion," he said.
Ebeid said the national industrial infrastructure would be modernised, educational institutions and research centres would be upgraded, government ministries and administrative institutions streamlined and an export-oriented infrastructure established.
Ebeid revealed that his government would submit a total of 17 draft laws to parliament as an initial step to turn these ambitious objectives into reality.
A number of deputies interviewed by Al-Ahram Weekly said that before the debate opened on Ebeid's second policy statement, discussions should first focus on whether he was able to deliver on the promises made in the first statement. "The first statement, delivered on 18 December 1999 included a 14-point social programme and a 16-point economic plan," independent MP Mohamed El-Badrashini said. "We want to know whether Ebeid's government has been able to implement these social and economic programmes."
Another independent MP, Damietta's Mohamed Qiwita, expressed surprise that the policy statement made no mention of political reform. "This reinforces the prevailing belief that the prime minister in this country is usually an economic expert appointed for achieving special economic objectives," he said.
Hamdi El-Tahan, a member of the ruling National Democratic Party (NDP), argued that Ebeid's government had confronted many adverse and negative economic developments on global markets in the past year. "I think we should give this government another opportunity to achieve its ambitious objectives," El-Tahan said.
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