Ghali announces major reform to eliminate bureaucracy in coming months
CAIRO: Minister of Finance Youssef Boutros Ghali defended the government s ongoing economic reform program Tuesday, saying some outcomes are already becoming visible.
Speaking at the Amercian Chamber of Commerce, Ghali acknowledged a larger trade deficit, increasing public debt and a growing gap between the rich and poor but said they are necessary byproducts and healthy signs of economic growth.
The trade account is in a bigger deficit and that s good, Ghali said. We re importing more raw materials and machinery.
The annual economic growth rate reached 7 percent in H1 2006-07 excluding oil and 6.6 percent including oil, he reported. Foreign direct investment (FDI) reached $6.6 billion over the same period, equivalent to the 2006 year-end figure.
Granted, [the H1 2006-07 FDI figure] includes one-time events such as the sale of the third mobile license, but nevertheless, it s money coming in, Ghali said.
The government s economic cabinet, left virtually unchanged since its appointment in mid-2004, has been facing increasing public criticism for its liberalization policies which are yet to be felt by nearly 70 percent of the population living under the United Nations poverty line of $2 per day.
Public outbursts have occurred in the textiles sector where 27,000 workers from two of the country s largest producers went on strike last month for not receiving their annual profit-sharing bonuses. The Ministries of Investment and Labor settled with the strikers last week with Minister of Labor and Manpower Aisha Abdel Hadi blaming the strikes on incitement by the banned group, or the Muslim Brotherhood.
Ghali said public discontent is normal because fighting inequality becomes harder with economic expansion.
The gap between rich and poor will increase, he said. This is not typical to the Egyptian economy or African economies. It s typical to all economies that go through a burst of activity.
One of the factors that has contributed to increasing public debt, and increasing budget deficit as a result, has been increasing government subsidization of energy to combat local inflation and encourage foreign direct investment, says Ghali. Despite allocating an all-time high LE 53 billion in the 2006-07 budget to energy subsidies, the government still had to raise fuel prices by 30 percent in July due to skyrocketing oil prices internationally, helping push the annual inflation rate into double digits. The reported January inflation rate of 12.4 percent ended a nine-month streak of increases.
Ghali said the government is considering targeted energy subsidization cuts but will only implement them when it is certain the working class will not be harmed.
He added the Ministries of Finance and Investment are now producing a major reform to eliminate bureaucracy to be introduced to the People s Assembly in the coming months, but declined to specify the nature of the reform.