CAIRO: New economic policies should be the priority of the newly appointed cabinet, an economist stressed in response to the government’s newfound optimism in the resilience of Egypt’s economy.
After taking the oath, Egypt’s new finance minister and deputy prime minister Hazem El-Beblawi said the Egyptian economy, which was battered in the aftermath of the January 25 uprising that toppled the previous regime, is strong enough to face the consequences.
Despite El-Beblawi’s optimism, economic experts believe the country needs to take a more “realistic” approach when it comes to reforming economic policies in order to pull the economy out of the trenches.
“Creating new economic policies is where I put Hazem El-Beblawi responsible now,” said Magda Kandil, executive director for the Egyptian Center for Economic Studies.
El-Beblawi’s statement was made in the presence of his assistant as well as other officials and heads in the ministry, according to Egynews.net.
Kandil believes that as the newly appointed minister, El-Beblawi has to be optimistic; however, over the past six months, the country has been seeing a growing deficit and no clear reforms that could provide a cure.
In addition, there is the threat of inflation as consumption is increasing while productivity is not, said Kandil.
As a result, the finance minister will have to look to other remedies such as boosting SMEs or increasing non-energy exports in order to boost foreign currency reserves.
After the uprising, the Central Bank’s foreign reserves have slowly declined as tourism and foreign direct investments (FDIs), two of the country’s main sources of foreign currency, were shot down.
To counteract their decline, the government’s best bet now is to go after reviving non-energy exports since they are easier to revive than tourism and FDIs, which rely on the political stability of the country, according to Kandil.
However, the country’s political situation took another downturn when a march of several thousand protesters headed to the Ministry of Defense on Saturday turned violent with clashes between protesters and alleged residents of Cairo’s Abbasiya district.
Protesters and activists across the country held the council members responsible for “inciting” violence between Egyptians, through statements that alleged that some activists are driving a wedge between the people and the army.
Because of such events that threaten overall security and stability the political scene, Kandil believes the market’s FDIs will not be returning anytime soon.
“We can’t wait for big investors to come; they are waiting to take their decision, what is going on in Tahrir and Abbasiya will force them to wait to regain confidence back in the market,” she said.
“The economic policies over the past six months haven’t addressed concerns of the private sector which has been affected by a number of developments since the revolution,” said Kandil, “From security failure, the sectarian violence we had for a while, and the private sector’s tarnished image as many businessmen were being associated with the previous regime for corruption allegations.”
Kandil pointed out that many of these issues have frightened investors and the key to moving forward now is helping the private sector get back on its feet.
“Many people couldn’t separate between corruption and the private sector, but in fact the private sector is vital to the economy for creating jobs, we shouldn’t hold all private businesses accountable for the mistakes of others.”
El-Beblawi’s mission now should be to collaborate with these businesses in order to see how the government and the private sector can work together to boost the economy, said Kandil.
She also added that the government still has not been facilitating business for Small and Medium Enterprises (SMEs) that were struggling before and after the revolution due to obstructive policies.
“We’ve seen very little in terms of stimulation measures in the context of the new 2011-2012 fiscal year budget,” Kandil said.
“Numerous private businesses in the country have been denied loans and the government is not doing anything for these businesses, which carry the most potential to revive the economy.”
