Al-Ahram Weekly Online   15 - 21 December 2011
Issue No. 1076
Economy
 
Published in Cairo by AL-AHRAM established in 1875

Cabinet unveils economic agenda

The new cabinet plans a series of measures to push the economy forward, Mona El-Fiqi reports

On Sunday, Kamal El-Ganzouri, the third temporary prime minister since former President Hosni Mubarak's ouster in February, held a press conference to explain the government's agenda during the coming few months. El-Ganzouri and his "national salvation government" were appointed by the Supreme Council of the Armed Forces (SCAF at the end of November after a violent crackdown on protesters demanding the end of military rule.

Moreover the military council, which stepped in when Mubarak was ousted, gave El-Ganzouri presidential powers excluding any powers over the military and the judiciary.

El-Ganzouri, who previously took responsibility during a sensitive phase in Egypt's history over a decade ago, said that his priorities were the restoration of security and economic progress. El-Ganzouri said that the economic situation is very dangerous but Egypt cannot achieve anything without restoring security.

Ahmed Ghoneim, professor of economics at Cairo University, asserted the importance of restoring security for the sake of investments. "This is not so much to establish new projects -- which would be very difficult nowadays -- but to help already existing investments to continue working," Ghoneim said.

Egypt's economic performance is currently facing a slowdown following the 25 January revolution and the following political unrest. The International Monetary Fund (IMF) is projecting Egypt's economic growth to be just 1.2 per cent this year, compared to five per cent in 2010.

During the press conference, El-Ganzouri said: "The economic situation is worse than anyone can imagine." For example, the oil sector, which should be flourishing, is facing real problems. El-Ganzouri said that oil sector debts jumped to LE61 billion so banks are no more providing credit to the sector. The result was that the Ministry of Finance has been obliged to pump LE2 billion into the sector every month since July to help keep the oil sector going.

Moreover, monthly payments due for Egypt's local debt increased from around LE600-700 million during the 90s to LE3 billion from 2005 -- 2010 and hiked to currently register LE6 billion monthly leading the total budget deficit to reach LE 134 billion. According to El-Ganzouri, the government is working to overcome the budget deficit, to lighten the burden on citizens, to curb the increase of prices and try to save LE20 billion through rationalisation of expenditures, which the prime minister pledged that citizens would not feel.

The government, according to El-Ganzouri, is looking for additional resources to reduce the inflation rate which was 10 per cent in November according to the Central Bank of Egypt (CBE).

El-Ganzouri said that Egypt may borrow from abroad and that negotiations with the IMF will be held at the appropriate time. The IMF offered Egypt a $3 bil lion loan in June but officials turned it down. "Egypt has to borrow from abroad and it was a big mistake to refuse the IMF loan," Ghoneim argued. To face the budget deficit, he said "it is very important to get a loan as soon as possible with best terms."

El-Ganzouri clearly announced that the government does not intend to impose new taxes at the current phase to increase revenues. Ghoneim agreed that time is not suitable to impose any taxes. "The application of real estate tax should be postponed for two or three years and to be amended to exclude the family house,"Ghoneim added.

In an attempt to find out methods of fueling the economy, a ministerial committee formed to improve economic and financial performance held its first meeting on Sunday headed by Minister of Finance Momtaz El-Said. The committee discussed promoting the growth rate and the best way to deal with the budget deficit.

Last week El-Ganzouri also announced a government decision to retract land sold to investors in the north and west of the Gulf of Suez. He explained that the government was taking away lands because investors had not built their projects until now.

According to contracts signed in 1998, investors should have established projects on 10 per cent of land annually. El-Ganzouri asserted that the lands on which projects had been constructed will remain in investors' ownership.

On the other hand, El-Ganzouri said that the government does not intend to retract agricultural lands on which buildings were illegally constructed, but that fees would be levied on these lands to compensate the government.

In attempt to confront a serious garbage problem, El-Ganzouri assigned Cairo Governor Abdel Qawi Khalifa to review the problem of foreign garbage collection companies, saying he would end the crisis of garbage collection in Cairo.

As for subsidised bread, El-Ganzouri said that the government will do its best to provide bread easily to citizens through establishment of new large scale bakeries that will produce one million loaves of bread daily.

Commenting on the government agenda, Ghoneim said the government should control the internal markets to curb price hikes. He added that the government should not exaggerate in making promises, especially concerning the appointment of 500,000 employees in the government which is already overstaffed.

He also blamed the government for promising to enforce a maximum wage system, which is quite difficult to apply. One more tip recommended by Ghoneim is that the government should save the foreign reserves through a flexible foreign exchange system.

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