Egypt’s temporary government will seek to avoid implementing austerity measures and instead work to increase economic incentives by improving security and pumping new funds into the market, according to Ahmed Galal, Egypt’s new finance minister.
Galal assumed his position last week after the ouster of former Islamist president Mohamed Morsi, inheriting a budget deficit worth upwards of half of all government spending. The government did, however, receive $12bn in aid from a number of Arab Gulf countries immediately after the removal of Morsi.
Galal told journalists: “the government will seek to stimulate the economy by pumping additional money into Egypt’s markets, and will not seek to pursue any austerity measures.” He added that they would not seek to implement any sharp tax increases, or reduce spending in a way that would slow the country’s economic growth.
He said one of the best ways to address the country’s budget deficit was to incentivise the economy, which will lead to increases in tax revenues, which in turn will help reduce the deficit.
He added that stabilisation of the country after 30 consecutive months of political turmoil would go far to help improve the country’s economic prospects. He said: “political reconciliation would be the quickest way to stimulate Egypt’s economy, as improvement in security would encourage the return of large numbers of tourists, in addition to increasing the confidence and enthusiasm of both local and foreign investors.”
Galal downplayed the importance of resuming talks with the International Monetary Fund (IMF) over the country’s pending $4.8bn loan, which the previous government under former president Mohamed Morsi had been pursuing since August 2012. He stated last week that securing the loan was only “part of the solution” to Egypt’s problems.
Conditions for accepting the loan included the liberalisation of the economy, and decreasing subsidies for essential food and fuel products.
Galal said he was not against the notion of dealing with the IMF under such circumstances, as acceptance of such a loan would help Egypt improve its credibility worldwide and would work to inject additional funds into the country. He added that the current government sought to implement reform regardless of its dealings with the IMF.
Representatives from the IMF stated last Thursday that they would not resume talks regarding the $4.8bn loan until the country’s temporary government was recognised by the international community.
Galal said the government would continue to implement the previous government’s smart card program in order to cut back on the smuggling of subsidised goods.
Egypt’s temporary government has still not yet decided on whether it will seek to amend the public budget for the current fiscal year drafted by the country’s previous government, which took effect on 1 July.
Galal further stated that the government had no problem implementing the country’s Islamic bonds law passed under the Morsi administration, saying however that such tools would not be the primary means by which to manage the country’s funds.
Translated from Al-Borsa