The Elephant in Egypt’s Economic Woes
Cairo – Following their fixation on Egypt’s turbulent political scene, local and international reports on Egypt now point in panic to “the real problem”: the deteriorating economy and its disastrous impact on low-income citizens and the popularity of their rulers. But when a group of government officials and economic experts were put together in one room, they bounced the ball back to politicians. For immediate solutions to pressing challenges, there has to be both political will and consensus.
Like any current issue in Egypt, the relationship between politics and the economy is complex and overlapping – difficult to understand the crisis facing one without comprehending the other.
The social and political polarization that turned into violence over the past two months is rivaled by inflation, a struggling national currency, dwindling reserves, battered tourism, and a widening deficit in the face of social justice demands.
“Are we optimistic? Yes, because we know exactly what’s required [to fix the economy],” Rania el-Mashat, deputy governor of the Central Bank, said at a meeting held as part of the national dialogue on economic reform last week. “But delay and hesitation could stall us, and then the cost would be higher.” At a certain point, any economic decision would be useless, she added.
Officials on the same panel echoed the optimism. “Our economy can grow fast. We grow at one third of our potential,” said Hany Qadry Demian, first assistant to the minister of finance.
Demian presented a list of quick solutions proposed by the government that keeps social justice in mind. A bundle of tax reforms, a budget redistribution proposal with more realistic projections of trimming the deficit, and revisiting the mechanism of distributing subsidies rather than the amount allocated to it.
These steps lacked context or the vision, as several participants noted. This lack of clarity and confusion was best demonstrated through the speakers on a panel titled “Immediate solutions to the current challenges” hosted by the Economic Research Forum last week.
Demian represented the Ministry of Finance, as Minister Momtaz el-Said counted his days in office before this week’s cabinet reshuffle. As economic experts, journalists, and businessmen quizzed Demian and Mashat on numbers and strategies, the elephant in the room was if either of them – or even the minister, old or new – was the right person to lay out the government plan. Who sets the vision: the ministry or the Freedom and Justice Party previously headed by President Mohamed Morsi?
Absent from last Wednesday’s meeting were the FJP and their ultra conservative allies, the Salafis. The discussion was missing the necessary back and forth with the most influential, if not the ultimate, decision makers in the process: the ruling politicians.
Egypt is plagued by a chasm in governance stemming from unbalanced duality in decision makers: the government and officials on one hand and the FJP on the other. New taxes issued in a law last month in the buildup to the controversial constitution referendum were suspended in less than 24 hours. The economic “facts” President Morsi offered in his upbeat speech about the economy were Linked wordcontested by official reports. The details of a new law permitting shariah-compliant bonds are lost between the finance ministry, FJP and Islamic scholars.
These incidents, and many more, reveal a serious conflict between various parties involved in the decision-making mechanism.
“Who do we talk to?” asked veteran economist Galal Amin. “And do they want to listen or are they occupied with something else?”
Like the political national dialogue boycotted by opposition forces skeptical about the existence of a genuine will to reach consensus, the seven-part economic dialogue didn’t feel much different. Nothing could guarantee that this national dialogue won’t face the same fate as the hearing sessions organized by the Constituent Assembly. The woman in charge of collecting and organizing citizens’ suggestions quit last year, saying that her work was consistently ignored.
Minister of International Cooperation Ashraf al-Araby, who coordinates the dialogue, insisted that suggestions and comments will be taken into account. Prime Minister Hisham Qandil published a nine-page summary of the seven panels that discussed tourism, energy, social justice, corruption, entrepreneurship, and investment.
A political solution remains on top of the list.