- The Egyptian government presented its vision to get out of the severe economic crisis that the country is going through. The local and international economic circles were waiting for it, and hoping for it to continue what it described as the journey of economic reform that began 8 years ago.
According to observers and economic experts, the vision put forward by the government did not deviate from the old pledges it made in 2016 and repeated on more than one occasion, only a few of which were achieved.
Such as putting the shares of government and armed forces companies on the stock exchange, and liberating the economy from state control.
Prime Minister Mostafa Madbouly held an international press conference at the headquarters of the General Authority for Investment and Free Zones to announce the Egyptian state's plan to deal with the global economic crisis, last Sunday, in the presence of a number of ministers, describing what is happening as "the worst crisis that the entire world has experienced since the 1920s, that is, since nearly 100 years."
Egypt incurred major economic losses, and Madbouly estimated the direct impact of the crisis in the coming period at about 130 billion pounds ($7 billion) due to the Russian-Ukrainian crisis as a result of the increase in commodity prices and indirect effects by about 335 billion pounds (18 billion dollars), meaning that the total effects amount to $25 billion.
Hot money escape
In a comparison between the prices of a number of basic commodities in May 2021 and May 2022, the bill for the purchase of nearly 10 million tons of wheat rose from 2.7 billion dollars to 4.4 billion dollars, an increase of 62.9%, and the oil import bill jumped from 6.7 billion dollars to 11.2 billion dollars. One billion dollars, an increase of 67.1%, to purchase 100 million barrels of oil.
With regard to the amount of hot money that came out of the Egyptian market, Madbouly said that the amount of money that came out of Egypt since the beginning of the year amounted to 20 billion dollars, but he indicated that his government succeeded in attracting nearly 12 billion dollars between Gulf investments and deposits, pointing to the agreement. To convert bank deposits into direct investments in Egypt.
The Egyptian state’s plan to deal with the global economic crisis is summarized in the following measures:
Raise the private sector participation rate to 65% of the total investments implemented in the next three years.
Making state-owned assets of $40 billion available for partnership with the Egyptian or foreign private sector for a period of 4 years.
Offering 10 public sector companies on the stock exchange, two of which are affiliated with the armed forces.
Merging the largest 7 Egyptian ports under the umbrella of one company, and the largest distinguished hotels as well, to put percentages of them on the stock exchange.
Decrease in public debt from 86% to 75% over 4 years until 2026.
Achieving a primary surplus this year of no less than 1.2% of GDP, and reducing the budget deficit to 6.2% this year.
It is scheduled to announce this month (May) a document of state ownership policies, which includes the activities and sectors that the state will exit from in accordance with international standards, but Madbouly praised the state’s intervention in the economy in the past years, as it pumped huge investments that created more than 5 million job opportunities. At the same time, praising the road network and "bridges" that it implemented, in response to the criticism directed at those projects that cost exorbitant money, which opponents saw as directing them to support industrial projects.
#Prime Minister: The world has not witnessed such a crisis since World War II, and there are losses estimated at 12 trillion# TeNTV pic.twitter.com/c909e4T3fc
— TeN TV (@TeNTVEG) May 15, 2022
Message to the International Monetary Fund
The Egyptian-American businessman and economic expert Mahmoud Wahba played down the feasibility of the Egyptian government's plans to get out of the crisis, and considered it a "message to the International Monetary Fund in order to speed up discussions to provide a new loan, and nothing more."
Last March, the International Monetary Fund announced that Egypt had requested support from the Fund to implement a comprehensive economic program, and added - in a statement - that the continuity of exchange rate flexibility would be necessary to absorb external shocks.
Wahba stressed, in statements to Al-Jazeera Net, that what the Prime Minister said cannot be used as a real solution, but rather it seems like a subversive approach, noting that the support of the supporting countries will not work for long because what they offer are just palliatives, as he put it.
Egypt adopted a reform plan from the International Monetary Fund, which included announcing in January 2016 its intention to offer stakes in successful government companies and banks on the stock market in the next stage.
In March 2018, the Egyptian government revealed its intention to offer stakes in 23 companies as part of a program to raise 80 billion pounds within 24 to 30 months.
However, these plans remained locked in implementation over the past years, and Egypt replaced them by expanding borrowing, and attracting hot money (foreign investments in Egyptian government bills and bonds) as a quick alternative, until it reached 33 billion dollars in August 2021.
The government announces opening the way for the private sector to participate in state-owned assets over 4 years, with a total value of $40 billion pic.twitter.com/Sn6xyBlUCO
- Al Jazeera Egypt (@AJA_Egypt) May 15, 2022
Old vows in new clothes
Dr. Omnia Helmy, former Vice Dean of the Faculty of Economics and Political Science at Cairo University for Graduate Studies and Research, described the economic crisis as “unprecedented and definitely different from its predecessors, and effective and final solutions must be found.”
And regarding the reasons that could push the Egyptian government to implement its old pledges that it presented at the World Conference as a new vision to get out of the crisis, she told Al Jazeera Net that what is new is that global economic crises have become successive, such as the Corona pandemic and its mutations and the resulting major economic repercussions, then the Russian crisis. Ukrainian, and all of this requires swift and swift action to implement reforms.
The economic expert, who held the position of director of research at the Egyptian Center for Economic Studies, urged the Egyptian government to speed up the pace of economic reforms, and open the way for the private sector, whose role has declined on behalf of the state, noting that there is a funding gap that must be filled through foreign direct investments such as establishing factories. And companies and the development of the level of services because indirect investments have no restrictions on their exit from the country.
She added that Egypt needs to pay attention to the industrial and agricultural sectors, which are the real economic sectors, especially as it is a net importer of food, in addition to raw materials that are entered as intermediate commodities in many industries, pointing out that the structure of imports suffers from problems, and then all of this is reflected in inflation and the standard of living of individuals and the rise The cost of local production.
Egypt has always hesitated to implement its commitments and has postponed them more than once, the latest of which was a statement by the Egyptian Minister of Business Sector Hisham Tawfiq to Reuters last week, when he said that his country's government will postpone the planned offering of shares of a number of government companies on the stock exchange until after the end of the summer holidays for investors.
Economic decisions topped the headlines of Sisi’s decisions, during the Egyptian family’s breakfast party at the end of the last month of Ramadan. His most prominent economic assignments to the government regarding dealing with the global economic crisis were 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.