CAIRO: Foreign investments may come at a standstill in Egypt for the next six months until elections take place, but Samir Radwan, newly appointed minister of finance, is mulling over a stimulus plan in an effort to help create jobs and avoid further protests.
“There is a need for a stimulus package that is very closely related to employment,” Radwan is quoted as saying on the ministry’s website.
A main cause for recent protests to oust the regime of former president Hosni Mubarak was the high unemployment rate. The current unemployment rate is estimated at about 9 percent, with approximately 50 percent of those under 25 are unemployed. Figures are believed to be higher, according to independent observers.
According to a source in the ministry, talks are underway on details of the stimulus plan and its possible implications, but nothing is set in stone at this point in time.
“The minister is currently looking at all options and the details of the possible stimulus plan, but it looks as though we are working towards the stimulus,” said the source.
Radwan has also been cited as assuring international investors of the growth prospects in the country, even with the closure of the Egyptian stock market and banks.
The Egyptian Stock Exchange, which was due to open this week, has delayed opening the market until next week after investors called asking to delay trading for fear of a market fall.
Having been hailed by some as the most advanced in the Middle East, the Egyptian market is expected to run on reduced trading hours in conjunction with a number of mechanisms set to support liquidity.
The new stimulus package is expected to widen the country’s budget deficit, which Radwan predicts to be around 8 percent and other economists have estimated it to reach above 10 percent.
“On its own, there is of course a risk that we see slowing growth, lower revenue and higher deficits,” said Mark Rorison, head of research at investment bank CI Capital.
He also cited high and stubborn inflation coupled with increased interest rates and weaker currency.
“This plan cannot be looked at on its own, but how it fits with the political process, the newfound energy and patriotism of individual Egyptians,” Rorison explained.
He added that the efforts of the Ministry of Finance to accelerate encouragement of the FDI should also be considered.
“Getting the mix of it right, in terms of all the challenges along with an end to corruption, and this country will grow faster and have a compelling investment story benefiting all Egyptians,” says Rorison.
While most investors are waiting until the uncertainty of the economy and government to diminish, Rorison says he has already talked to investors who want to put their money into the country.
“Some investors want to come in and others are putting theirs on hold — this is not a debate, it is pontificating as things are changing hourly,” said Rorison.
