ECONOMY

Egypt’s finance minister addresses economic woes in Davos

High rates of unemployment, a pressured currency and a decline in reserves are behind Egypt’s economic struggles, said the country’s finance minister. (File photo: Reuters)

Egypt’s economy is suffering from high unemployment rates, a pressured pound, and a decline in foreign currency reserves, the finance minister told Al Arabiya News Channel.

“Unemployment is very high, there are pressures on the [Egyptian] pound and a decline in reserves,” Finance Minister Ahmed Galal told Al Arabiya during an interview on the sideline of the 44th World Economic Forum.

Egypt is participating in the forum to restore international confidence in the country’s economy, and present some planned reforms.

The country whose economy had suffered due to political turmoil since 2011, presented its first stimulus package “worth 30 billion pounds, and the second stimulus package will be around the same… we are preparing it now and want to ensure that we have sufficient resources for the intended spending, we don't want to exceed our spending,” Galal explained.

The country announced the stimulus during the first quarter of its fiscal year “between last July and September,” but the process, specially “investment spending… will take time.

"the coming stimulus packages has two folds, the first is ongoing spending… and its effect will be immediate, as people will notice it when they receive their salaries in January [unlike] investment spending," said the minister.

“I expect that the third quarter will see an economic activity that's much higher that then last two quarters," he added.

A solid political base

Galal supported the recent Egyptian referendum, explaining its direct reflection on the economy.

He described the ongoing political progress to be “the real base to economic growth.”

"The economy will not have a solid base without a balanced political system, so the referendum and its results is an important step in building the fundamentals of a political system in Egypt, which will help us in sustainable growth," he told Al Arabiya.

A provision in Egypt’s new constitution stated an increased spending in the sectors of healthcare, education and scientific research. The value of the increase “is worth around ten percent of the total national income," explained Galal.

According to the minister, the new constitution also states that "there will be a two-year transitional period in which spending will gradually increase to reach the set levels."

In statements supporting the relatively long interim period of gradual spending increase, the official explained that “no economy can handle drastic change. [It] should be dealt with gradually and slowly, for people to adapt to it.”

Subsidies

Egypt announced plans to introduce smart cards to distribute gasoline and diesel in an attempt to reduce amounts spent on subsidized energy products, Reuters reported last May.

"At the initial stage, the true value of the smart card is to simply prevent theft.

"Subsidizing energy currently costs the country around 130 billion pounds, so it is a very large number that is quite heavy on the economy," Galal explained at the WEF.

While not neglecting subsidizing other goods, the official said that prioritizing energy products over other goods is due to a new direction followed by the government.

“[The government is] targeting poor families who deserve subsidies, rather than targeting the goods used by the poor and the rich alike, we want to gradually move in that direction.”

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Last Update: Thursday, 23 January 2014 KSA 11:24 - GMT 08:24
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Egypt’s finance minister addresses economic woes in Davos
Ahmed Galal said unemployment and declining reserves are at the core of Egypt's economic crisis
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