By Sara Aggour and Doaa Farid
The political and economic situations of any country are inextricably linked, and for the past two years those of Egypt have mutually reinforced each other’s instability; the constant changing of the cabinet weakened the economy, which mobilised masses further against the government, eventually leading to the ouster of former president Mohamed Morsi.
The Daily News Egypt spoke to Egyptian economy experts to gain their insight on how the new government should manage the current economic crisis.
Expert Reda Essa identified two major problems; security and economics. He said: “if the security problem is solved, economic stability will be reached and the government can form a precise plan to face the problems with the country’s budget.”
Hala El-Saeed, an economics professor at Cairo University, stated: “the government needs to have a clear macroeconomic vision with visible solutions, and the right tools to execute these solutions.”
“We have high unemployment rate, a big budget deficit, and we need to re-build the mutual trust [with private investors.]” she said, adding: “the government needs to prioritize the problems and solve them accordingly.”
She stated that she saw an opportunity in a public that is willing to help in the economic reform initiative: “We’ve seen funds and campaign started by businessmen and syndicates to raise money and assist in the reform process during the past week.”
“These initiatives created new financial resources for the country so the government must find a way to engage the Egyptian public in the process,” El-Saeed added.
El-Saeed identified taxes as a main problem facing the Egyptian economic, citing the low tax payer rate as a main reason. She stated that in-depth studies of the Egyptian society must be conducted to determine levels of society based on income so the government could apply taxes accordingly.
Essa supported the idea of such a study, stating: “60% of the taxes are collected from the average citizen, the consumer and more the 24% are from the Egyptian general petroleum corporation, the foreign partners and other petroleum companies. Only 15% of the other investment companies in Egypt pay taxes and this is a catastrophic issue that needs to be solved.” He added that another part of Egypt’s economic burden was its interest payments of $180bn on its loans from foreign aid.
Magdy Tolba, financial expert and the chairman and owner of Egyptian Company for Trading & Construction added: “We’re waiting from the next government to suspend accepting grants and aids from other countries and build our own economy.”
Tolba stressed that the government should have a clear strategy which will achieve development and increase the production. He added that the key to economic prosperity depended on the scientific research and efficiencies, not the “political identity.”
On the other hand, Sherif Sami, an investment advisor, said that the next government has only to “run the business,” adding that the complex situation of the interim government due to the non-existence of a parliament nor president, would not allow it to generate new plans nor an agenda.
He argued that the government would only have to keep the exchange reserves to reduce the deterioration of the Egyptian pound, fill the budget deficit and provide liquidity to buy gasoline and wheat.
Sami claimed that a total change in the economic policy would not be required, stating that some decisions like the constructions of new industrial areas and imposing new investment policies just need more stability. Some other decisions, like external borrowing, require sacrifices which are outside the purview of the incoming government, he added.
According to the latest statement released by the central bank on 7 July, the international foreign reserves reached $14921.7m and that balance of payments (BOP) deficit narrowed to $2.1bn, over the past nine months.