CAIRO: In the economic rollercoaster that the world has been put through in the past few years, watching fiscal deficits and having a handle on funding strategies is good advice.
These words of wisdom came from Howard Davies, director of the London School of Economics, on the eve of the official inauguration of the Egyptian Financial Supervisory Authority’s (EFSA) Egyptian Institute for Financial Services (EIFS).
Davies, former deputy governor of the Bank of England and a special adviser to the Chancellor of the Exchequer, discussed financial markets during a talk at the American University in Cairo titled "Regulating the Financial Markets: Lessons, challenges and prospects in the aftermath of the world crisis."
“You need to be sure to have an official message to the market on your fiscal position showing you have a sustainable place and that it does not spiral beyond your control,” Davies told Daily News Egypt, adding that there is worry about sovereign debt problems.
It is no surprise that Cairo isn’t a financial hotspot internationally crossing borders, says Davies, but that it is a contender in the regional market.
“Egypt has good officials, good economists, good regulatory structure and the central bank is respected; it is great in the regional market, but has not become an institution that operates globally,” he explains.
He added that for the most part, countries in the Middle East and North African region do not engage in high risk activities, but that finance authorities need to be prepared to act in a precautionary way when needed.
According to Davies, the debt markets in Egypt are not robust and are too reliant on the banking industry.
Possibly working in Egypt’s favor is the fact that economies are looking east due to the financial situations in the more established markets of the west, such as the United States’ economy not bouncing back from recession as rapidly as hoped and trouble in European Union markets.
With the current weakening of the dollar and its effect in Egypt’s finances, Davies believes that this was just a side effect of the Federal Reserve wanting to keep low interest rates.
Davies also discussed the financial situation in the European markets, saying that the EU is lacking the adequate structure to regulate a single market.
He also expressed grief over the notion that there is presently no central global regulatory authority with power to deliver.
“There really should be a supranational institution in Europe that is going to stand behind countries that are unable to borrow from the market as well a European entity set up to deal with banks operating on the pan-European level,” said Davies.
Moreover, he added that there is currently no agreement on the new relationship between regulators and markets and that there are signs that the reaction toe the crisis may manifest a new lack of stability that will possess too large of a part for the states.
While offering advice to the rather large crowd gathered to hear him speak, Davies recommended that shareholders play a bigger role in the control of their companies.
According to Ziad Bahaa Eldin, chairman of the EFSA, the EIFS was created as a way to improve market awareness.
The institute will train EFSA employees more thoroughly as well as professionals in the market in various ways, such as workshops and models, as well as educate non users of the financial world.