CAIRO: Egypt’s government is channeling most of its additional spending into infrastructure projects in a bid to combat fall-out from the global financial crisis and kick-start recovery, according to the country’s Minister of Finance.
In an exclusive interview with Oxford Business Group (OBG), the leading global publishing, research and consultancy firm, Youssef Boutros-Ghali acknowledged that the strategy would increase the budget deficit, which has been revised to 8.4 percent, for the current fiscal year, but voiced his confidence that economic growth achieved over time would ease the debt.
“In combating a global downturn, public investment is crucial to recovery, which is why the majority of the stimulus package has been allocated towards infrastructure, he said. “This typically increases long-term GDP growth and will allow us to comfortably absorb a swelling budget deficit in the coming years.
Despite the challenges that the global financial crisis has triggered, Boutros-Ghali remains bullish on Egypt’s prospects for achieving economic growth.
“The Egyptian economy has emerged unscathed on the financial side, as the banking system had few links to the outside world and minimal investments in structured products, he said.
The minister’s comments come as figures show that Egypt’s economy witnessed growth of 4.7 percent last year. Boutros-Ghali has said that he expects growth to reach 5 percent in 2010.
He acknowledged that Egypt is steeling itself to deal with a ripple effect as global economies set off on the bumpy road towards economic recovery. “In line with markets globally, the country will continue to grapple with widespread fall-out due to the global downturn, he said.
“The climate of anxiety and lack of confidence internationally has affected domestic investors as well, exerting downward pressure on their spending.
The minister also believes that the time is ripe for Egypt’s state-owned banks to reform and embrace new areas of business if they are to compete for growth with private financial institutions. Boutros-Ghali acknowledged that the banks would need an injection of capital which would enable them to comfortably expand their activities.
“Secondly, sophisticated banking know-how needs to be acquired with an emphasis on the modernization of lending techniques, market access, small and medium-sized enterprise lending practices and portfolio management, he said. -Oxford Business Group
The interview with Boutros-Ghali will feature in “The Report: Egypt 2010, which will offer up-to-date analysis of political, macroeconomic and sectoral developments and will be available in print form and online.
