Cairo -
There is no talk in Egypt over the economic crisis that the country is going through, which threatens the 8-year march of what the Egyptian government describes as economic reform, due to the impact of the Russian war on Ukraine, and the resulting negative economic effects.
It seems that this is what prompted President Abdel Fattah El-Sisi to announce a package of economic decisions to confront the crisis. Will these decisions help in addressing the rise in prices, limiting the wave of inflation and correcting the economic course?
During the Egyptian family’s breakfast party in the last week of Ramadan, Sisi’s most prominent economic assignments to the government regarding dealing with the global economic crisis came as follows:
Assigning the government to announce a program for private sector participation in state-owned assets with a target of $10 billion annually for a period of 4 years.
Assigning the government to enhance all aspects of support provided to wheat farmers.
Launching an initiative to support and localize national industries.
Offering stakes from state-owned companies in the Egyptian Stock Exchange before the end of this year.
Presentation of shares of military-owned companies in the stock exchange.
Strengthening the role of the private sector in expanding the industrial base of large and medium industries.
Assigning the government to present an integrated vision for the advancement of the Egyptian Stock Exchange.
Assigning the government to hold an international press conference to announce the Egyptian state's plan to deal with the global economic crisis.
Previous and recurring recommendations
These decisions come in response to previous and repeated recommendations of experts, institutions and international economic periodicals, especially with the marginalization of the role of the private sector in Egypt, and the reliance on loans extensively to secure financial resources, whether for national projects or the general budget.
In a step that revealed the depth of the financial crisis that Egypt is going through, the Central Bank decided at the end of last March to take a series of harsh measures, represented in devaluing the pound against hard currencies by about 19%, raising the interest rate by 1%, and offering savings certificates with a high interest rate of 18% for a year. The Egyptian government formally requested support from the International Monetary Fund to help mitigate the economic repercussions.
Since 2016, the International Monetary Fund has agreed to grant Egypt 3 loans totaling $20 billion, but it seems that they were not enough to put the Egyptian economy on the right track and make it able to absorb the global economic crisis.
New statements for old decisions
Al-Sisi’s decisions, according to economic experts and analysts, are part of the repeated pledges he made on more than one occasion;
But there were no serious steps to implement them on the ground, in light of the generous flows of foreign investors in debt instruments and bonds, and the conclusion of more international loan agreements, and thus the situation remains as it is.
But it seems that the economic pressures caused by the war in Ukraine have provided a new sense of necessity to implement the proposals, according to a report by the Financial Times a few days ago, as the conflict forced Egypt to devalue its currency last March and requested support from the IMF. International Monetary to provide some reassurance to investors.
The newspaper pointed out that the expanding influence of the military in the economy has hindered some private and foreign investors due to concerns about competition with the most powerful institution in the country, noting that the military owns dozens of companies in a range of sectors from food production and education to industry and real estate.
Will Sisi’s initiative succeed in repairing the major cracks in the economy, or is it a call to share losses after it has implemented the trick and the means?
Is there enough time to implement these decisions, which the government proceeded very slowly at a time when the crisis is tightening the screws on the deteriorating Egyptian economy, as described by the Director of the International Monetary Fund, Kristalina Georgieva.
Inefficiency and deterioration of investment
Al-Sisi previously expressed his frustration with the performance of his government, and stated at the opening of a new chemical factory on December 28 that the state is not good at managing the economy, and said, “We need the private sector, we have proven incompetent in managing,” According to the British magazine, The Economist.
The Purchasing Managers' Index (a measure of business and operating conditions in the non-oil private sector) showed private production contracting in all but 9 of the past 60 months, and foreign direct investment down from 3.4% of GDP in the 2016-2017 fiscal year. to 1.3% in the 2020-2021 fiscal year.
The Egyptian government is expected to announce the details of the "state ownership policy document", within the framework of preparing a national strategy for empowering the private sector, and defining the activities of the state and the private sector in order to send a message of reassurance to the local investor, to be an element of attraction for foreign investment, and to contribute to strengthening the confidence of international institutions.
In this context, Hani Geneina, an economist and lecturer at the American University in Cairo, believes that implementing these economic decisions will have a positive impact in reducing pressure on the state's general budget, and enabling it to gradually reduce the budget deficit.
Thus controlling the public debt rates.
Geneina explained - in press statements - that increasing the role of the private sector will put an end to the deterioration of private investment after 2010, as the proportion of private investment decreased from about 10% of GDP in 2009-2010, to about 2.5% of GDP in 2020 - 2021, with the private sector reluctance to invest.
Big decisions, slow moves
In answer to a question if Sisi’s recent economic decision package constitutes a breakthrough for the private sector and an indication of the state’s abandonment of its hegemony over the joints of the economy, and the revival of the crisis situation, the economist and strategist Alaa El-Sayed said, “Changing the course of the traditional economy dominated by the state and the military does not It is achieved in a day and a night, and its economic return takes time, while the economic crisis is sweeping the country hard, and it is difficult for the state to give up its control.
In his speech to Al-Jazeera Net, Mr. pledged any real breakthrough by taking practical steps towards correcting many wrong situations and broadcasting reassuring messages to local and foreign investors, such as the release of the founder of the Juhayna Dairy and Juice Company and its Chairman of Board of Directors Safwan Thabet and his son Saif, after they were imprisoned for control of their company, he said.
The Economist magazine mentioned the Thabet family case as an example of the army's control of the economy and the authorities' clampdown on businessmen and the private sector, which caused the economy to worsen and the failure to build a manufacturing base, and to curb the arrival of foreign investors, according to the magazine's description.
And the British magazine said in a report at the end of last April, that Juhayna for the manufacture of dairy and juices - the largest company of its kind in the country - its production of milk and yoghurt is sold throughout the Middle East and Africa, and it was one of the most valuable companies on the Cairo Stock Exchange and impressed investors. Foreigners, however, faced, under the current rule, "Mafia-style blackmail", as the magazine put it.
Al-Sayed considered that the recent package of decisions is an attempt to escape the imam, but it is repeated decisions in which the Egyptian authorities did not take any real steps on the ground, and an attempt to gain time and gain no confidence towards what he called the danger of direct investment in a country whose economy is controlled by the army, as he put it.
The economic expert expressed his belief that these decisions to make way for the return of the private sector came after the army companies were overwhelmed by the volume of business and projects that they had obtained by direct order, and they no longer had the human or material capacity to take more, or accomplish the rest with them, nor There is liquidity in the state to complete it, and this is the anchor of the horse, according to his belief.