Cairo - Akram Ali
The Egyptian economy is facing serious problems, and is in need for a comprehensive long term plan, an Egyptian economic expert said.
In an interview with Arabstoday, Mona el-Baradei, executive director of the Egyptian Banking Institute, said security breaches and the smuggling of money out of Egypt are the two factors that have contributed significantly in the increase of the budget deficit.
El-Baradei spoke about the notable differences between the growth rates of Egypt's economy over the last few years. She said this was due to the lack of creative long term economic policies, which can maintain a relatively constant growth rate, and guarantee more job opportunities for Egypt's youth.
She pointed out the poverty rate in the country is growing, which shows that the economic policies applied in Egypt before the January 2011 revolution have lacked any vision for social justice.
She also warned against reducing the value of Egypt's national currency, the Egyptian Pound against the US Dollar and other foreign currencies, saying this can lead to a significant price increase in almost all the fundamental goods and services in Egypt, which the Egyptian people wouldn't have the ability to afford.
To reduce the budget deficit, el-Baradei said the Egyptian government have to start with lifting the fuel subsidies gradually over a 5-year timeline, since subsidies make up a huge ratio of Egypt's budget every year.
"Last year, 27 percent of the budget was dedicated to the subsidies, and 23 percent went towards paying the installments of foreign debts, those two items together make up 55 percent of the budget, so we only had 45 percent remaining for education, health care, diplomatic missions, infrastructure, military and security, it is clear that there is something terribly wrong in this distribution,"said el-Baradei.
Before the revolution, Egypt succeeded in building a relatively big reserve of foreign currency which reached $36 billion at the beginning of 2011. After less than two years, this reserve fell down to only $15.1 billion. Although this statistic was considered a serious negative sign, el-Baradei played down its significance.
"Governments are trying to keep financial reserves to use it in cases like the economic crisis or exceptional conditions, and Egypt has obviously gone through the most exceptional conditions in its recent history in the last couple of years, so this decrease is totally understandable and shouldn't draw fear," she said.
Egypt is currently in negotiations with the International Monetary Fund (IMF) over a $4.6 billion loan in order to help the Egyptian government with the deficit. A lot of controversy took place among Egypt's political experts over this loan, as some of them believe that raising Egypt's debt was not the right way to address the problem.
However, el-Baradei said she supported the notion of this loan, saying that the extraordinary conditions the Egyptian economy is going through requires looking for ways to fund the government's budget.
El-Baradei praised President Mohammed Morsi's efforts in the economic reports during the first 100 days of his tenure. Morsi made visits to some key economic figures around the world, most notably China and the United States, where he signed several economic deals and agreements, for injecting more foreign investments into the Egyptian economy.