Thursday,19 October, 2017
Current issue | Issue 1318, (3 - 9 November 2016)
Thursday,19 October, 2017
Issue 1318, (3 - 9 November 2016)

Ahram Weekly

Presenting the challenges

A press conference at the State Information Service presented the political and economic challenges the country is facing, reports Mohamed Abdel-Baky

 

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Al-Ahram Weekly

On Wednesday, Egypt’s State Information Service (SIS) hosted a press conference for international media to explain the complexities of the country’s current economic and political situation.

The speakers, lawmakers and economic experts, said the economic situation in Egypt was difficult but manageable. They also downplayed calls for mass protests against the government planned for 11 November. 

“Calls for a protest on 11 November are emanating from abroad and mainly through social media, so it still not serious as far as I can see,” said Khaled Okasha, a security expert. 

He added the group behind the calls was unknown. The Muslim Brotherhood has denied any connection to the protests. 

“Additionally, the Ministry of Interior has not received any request to hold demonstrations from either a group or individuals,” Okasha added. 

“Any group which wants to protest should respect the law by submitting an application to the Ministry of Interior which will approve it as long as the protest will not present any danger to public safety and remains peaceful,” Okasha said.

“Egypt has already realised its political road map, including having an elected parliament and president, so why do you think there should be groups that want to take any political or economic problem to the streets? We are trying to restore stability so any differences in opinion or political disputes should be conducted through legal channels like parliament or other legal forms. Protesting is not the only way and it will not do anything but create instability,” Okasha said. 

Egypt’s Central Bank announced on Thursday that it had floated the Egyptian pound and hiked interest rates by 300 basic points in a move to rebalance currency markets.

The bank set an initial guidance rate of LE13 to the US dollar at a sale and allows free bids and offers while the market converges on a real price. The Central Bank also said in a statement that it would abolish the priority list for imports and phase out monetary financing of the budget deficit over the coming months.

Ali Al-Moselhi, head of parliament’s economic committee, said the Egyptian government announced a set of reforms that aims at resolving the country’s problems, including tough decisions that must be taken immediately. 

“There are currently serious and brave steps being taken in this regard by the government. Most will have a direct impact on vulnerable groups. That is why the government, with the help of parliament, is preparing a temporary social safety net for these people at this stage,” Al-Moselhi said. 

He added that social safety net measures include an increase in the social solidarity pension and providing basic commodities at reasonable prices. 

“I expect the president to take a decision in a few days related to protecting vulnerable groups from economic reforms,” he added. 

“The price of the dollar is not the biggest problem; it is part of it. Solving the foreign currency reserve issue should be part of the bigger economic reform plan,” Al-Moselhi said.  

The economy is passing through rough times. It is facing severe economic recession that led to a decline in foreign currency reserves that reached $18 billion compared to $36 billion in 2010. A growing budget deficit has amounted to LE339.5 billion, representing 12.2 per cent of gross domestic product, and raising foreign debts to $55.8 billion.

In September the government announced that it had reached an agreement with the International Monetary Fund (IMF) for a $12 billion loan. The agreement aims to help the government take serious reforms including fuel and energy subsidy cuts viewed by previous governments a red line that if crossed could lead to social unrest. 

Al-Moselhi, who is also a former social solidarity minister, said the government should adopt more transparency for and communication with the public on the economic situation and the required reforms.

“The economic crisis is hitting major foreign currency resources including tourism, foreign investments and exports, which led to a sharp increase in the price of the dollar and a wide gap between its official and black market exchange rates, affecting many import-based businesses,” said Akram Tinawi, a board member at Egypt’s Banks Union.  

“The current price of the US dollar on the black market is not real. Over the past two days it fell LE2. The government with the Banks Union agreed on number of measures to fight the black market,” Tinawi said. 

“I believe that the foreign currency black market is economic terrorism that everybody should stand against,” he added. 

Ali Wali, an economy expert and a senior director at a consulting company, attributed the dollar shortage to the gap between the country’s increasing dependence on the dollar for imports and its lower dollar resources.

“The country needs $74 billion to import goods and the market only has $50 billion. This gap gave way to the black market. The solution should be through different measures including working to increase imports to increase the country’s sources of foreign currencies,” he said. 

“Egypt needs to have a clear vision and strategy with identifiable numbers and goals, to gradually increase its industrial exports as a main source of hard currency,” said Wali, stressing that the country should not rely solely on dollar revenues from tourism, the Suez Canal and remittances from Egyptian expatriates.

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