I warn of yet another failure for the Egyptian renaissance, which has not really picked up much since 1805. Today, we have but the modest economic objective of avoiding a recession.
Economists tell us that the economy is in deflation after it began to relatively expand in the 2014-2015 fiscal year, portending what they call a mini recession.
Indications for it are the decline, since the beginning of the year, in the Egyptian Stock Exchange, Egyptian exports, tourism, cash reserves of US$16 billion and a growth rate that stood at 4.2 percent last year, versus a targeted 5 percent or more.
Another reason to be pessimistic is that what has been achieved so far was partly due to the $30 billion Arab aid over the past two years. But the Gulf states are now preoccupied with the war in Syria, Iraq and Yemen, which costs them a lot at a time when oil prices are falling sharply.
This could affect the income and – consequently – the remittances of Egyptian expatriates living abroad, which reached $60 billion over the last three years. They are also discouraged by a government that seems more of a money collector than a promoter of investment.
Add to this the high rates of unemployment and inflation.
We could have dealt with all these challenges had we maintained rates of investment broader than just the major national projects that are carried out by the Armed Forces or foreign companies. For it is the government that finances these projects, which causes a chronic deficit in the state budget and increases the external debt.
Foreign private investment is shrinking due to bad fiscal and monetary policies, uncertainty regarding the collection of profits and the price of the Egyptian currency that no longer attracts investments of any kind.
As to domestic private investments, I quote business tycoon Naguib Sawiris who said that he did not invest a single dollar from the $500 million he promised during the economic conference because the investment climate is not encouraging.
Like the worker strikes, I believe there is a strike by Egyptian capitalists.
But we only need two things to resolve this situation. The first is that we should not try to circumvent the laws of economics, such as the law of supply and demand. In other words, we should not stick to an unrealistic currency value because this creates a black market and a corrupt economic climate that investors cannot speculate about, except with a means of fortune-telling.
We and other socialist countries experimented with this in the 1960s by manipulating the wages, the market and the currency, leading to one failure after another. I do not think we want to go back to this time.
The second thing we need is transparency in the implementation of national projects. It was reassuring when President Sisi said these projects were based on high-precision feasibility studies. But those studies have another job as well. They should open the door to domestic and foreign private investments, for the people want to participate with work and with money.
Edited translation from Al-Masry Al-Youm
