Economic turmoil… set our protests aside

There are no new foreign investments in Egypt… economic losses are in billions and the country will go bankrupt in three months… all are lies the Egyptian economy will flourish… etc., over the last few weeks contradicting announcements made by top officials about the economic situation in Egypt has raised lots of questions among investors and citizens as wellt

In various interviews, the Egyptian Minister of Finance Samir Radwan affirmed that the price tag for the labor unrest and political protests that have roiled Egypt since the outbreak of the mass demonstrations has reached $3.5 billion. “a total of $2.2 billion of the losses were in the tourism sector – an Egyptian mainstay that has been damaged badly since the start of the Jan. 25 revolution. The remainder is the cost incurred by the Treasury,” he added.

Radwan declared that the Egyptian exports have dropped 40 percent from pre-Jan. 25 levels while manufacturing is limping along at 50 percent of its capacity. He said in a statement released by the Finance Ministry that the various strikes and protests are the “main reason” why the budget deficit was growing.

The finance minister has been shuttling to the U.S. and other countries trying to secure financial aid and lure investors back to the country. He requested $2.2 billion in “soft” loans from the World Bank and between $3 billion and $4 billion in similar loans, “without conditions,” from the International Monetary Fund (IMF).

As a matter of fact, on the sideline of the G8 Summit, Prime Minister Essam Sharaf did discuss with the IMF Acting Managing Director John Lipsky prospects of cooperation between Egypt and the fund and also tackled an IMF initiative to offer between $3 billion to $4 billion to support the Egyptian economy over the coming four years. Sharaf reviewed an economic vision outlined by the government to meet all needs and requirements to get out of the “bottleneck” after the January 25 Revolution in order to create a stable Egypt.

Moreover, Sharaf seized the opportunity to meet with the French businessmen of main companies, such as France Telecom, Lafarge Cement and Vinci. This latter is a construction and electrical engineering company that undertook the Cairo Metro Line Three and expressed further interest to operate the new railway line to link Cairo and the 6th of October City. All Sharaf’s attempts aim at luring more investments into the country and restore some economic balance.

In terms of foreign investments, the deputy chairman of the country’s investment body said that foreign direct investment, which was forecast at $7 billion for the fiscal year ending June 30, was now expected to come in at between $3 billion to $4 billion.

Agreeing with Radwan’s statements, Marshal Mohamed Tantawy, Head of the Supreme Council of Armed Forces (SCAF) warned of the deteriorating economic conditions threatening the Egyptian society. “Hazards include a drop in investment, shuttering and bankruptcy of many small and medium size factories, an almost complete halt in the tourism sector with a loss of nearly $1 billion every month, spending $3 billion a month from public reserves, a rise in the budget deficit to reach nine per cent, borrowing from the World Bank around $10 billion, a peak in unemployment, increasing professional demands at a time when production and exports are retreating, skyrocketing prices, and a lack in basic goods,” highlighted Tantawy in his speech during the Police Academy graduating ceremony, held last month.

On the other hand, some economic analysts and social activists accused the SCAF and the current cabinet for misleading the public opinion by these economic scarecrows. In an article by Wael Gamal in El-Shorouk newspaper, he stated that Tantawy’s figures are totally contradicting. “First worng number, as shown researcher young Mahmoud Kamal is the one of the budget deficit, which was pointed out that it will reach up to 1290 billion Egyptian pounds, while the figures estimated, according to Radwan, that will increase in the new budget in an average of 155 to 185 billion Egyptian pound, or between 9.9 % to 11.9% of GDP. Note that the deficit fell in the period from July 2010 to the end of March 2011 (including the months of the Revolution) from 7.2% in the same period the previous year to 6.8%, according to a report of Finance in April.”

He further highlighted that the budget deficit is no longer sacred as it was before the global crisis to the economists. The projected deficit in the United States for example, is 10.9% and without a revolution.

Besides, Tantawy was attacked for declaring that foreign investments reached zero level. “According to financial reports, foreign are estimated 773.9 million Egyptian pounds in the period from January and April 2011,” highlighted Gamal. In fact, some major corporation in the petroleum sector, such as BG and Apache announced lately the increase of their investments in Egypt.

Presently, the Egyptian society is suffering from a huge mistrust, especially between citizens from one side and the SCAF and government from the other side. As a result, the above facts are exposed for your review since we are not economic experts and we are not in a place to condemn anyone during this critical period of time.


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