CAIRO: Egypt remains committed to pushing ahead with its ambitious economic reform program, the country s prime minister said, even as he raised the possibility that its currency may depreciate against the US dollar as the global economic crisis hits the Arab world s most populous nation.
Ahmed Nazif s comments at a business round-table Monday underscored the government s optimism about the country s ability to weather the global economic meltdown, despite mounting evidence that the financial crisis is exacting a toll on the country.
I believe that we have, [over] the last four years, set the direction and the pace for Egypt to leapfrog with its economy, Nazif said. Today, we might be losing a little bit of the pace, but I can assure you we will not change direction.
We will not compromise in our reform program, even if we suffer, said Nazif.
Over the past three years, Egypt has averaged economic growth of about 7 percent per year – a figure attributed to the government s push to shore up the banking sector, cut taxes, sell off state-owned enterprises and lure investors.
But the economic crisis has made its presence visible in a country where the World Bank estimates almost 20 percent of the population lives below the poverty line of roughly $2 per day. Officials last week announced that the second quarter fiscal 2008-2009 gross domestic product growth slipped to 4.1 percent.
That decline was markedly below officials projections late last year of a growth rate of between 5 to 6 percent.
But as the financial meltdown s impact becomes pronounced in Egypt, analysts have increasingly been pumping out less glowing projections, in one case as low as 3.5 percent, amid concerns that the slump will hammer key sectors like tourism, the Suez Canal, worker remittances and foreign direct investment.
Analysts at Egypt-based investment bank EFG-Hermes said they expected a significant decline in tourism, particularly from Europe, as travelers tighten their purse strings amid the global downturn.
It worries us? asked Nazif, referring to the slowdown in growth. Yes, it worries us. But again, I would say that this economy today enjoys a resilience that will allow it to sustain continued growth.
Even so, Nazif said while the Egyptian pound has held relatively steady versus the US dollar, it could face pressure in the coming period. But, so what, he said, in a reflection of confidence that the economy will stand up to the challenge.
Nazif s comments come just days after Egypt s Central Bank cut the interbank lending rate by 1 percentage point – to 12.5 percent – in a long-awaited move officials said came only after they saw clear evidence of a decline in inflation that late last year was over 20 percent.
Inflation fell to 14.5 percent in January, and government officials quoted in the local media have said they expect it to fall to 10 percent in March, pulled down by declines in global commodities prices.
Nazif pointed to that slide as one factor that would help the government fund its stimulus plan, which involves a $2.7 billion investment in infrastructure. The government is also looking to enact another $2.7 billion in spending to help buoy the economy.
Nazif said that some of the funds currently used to fund subsidies could be redirected to the stimulus projects, while the government would also borrow to fund the rest. He provided no breakdown in the figures.
The Egyptian premier also stressed that deregulation was a must under the reform program, citing the energy and transportation sectors as two the government was focusing on.
The government s economic reforms have generated some opposition. On Monday, private pharmacies went on strike over a new taxation law, while truck drivers have been striking for several days over new traffic legislation.
In the last few years, workers have staged a wave of strikes in public sector factories around the country over fears of job-loss with the privatization program as well as low wages amid rising prices.