CAO sums up govt economic performance (Part II)

In a statement before parliament on Sunday, Gawdat el-Malt, head of the state-run Central Auditing Organization (CAO), discussed the government’s performance in the face of rising inflation, poverty, unfair trade rules, poor public education and the state’s seeming failure to contain crises, among other issues. El-Malt went on to summarize the performance of Prime Minister Ahmed Nazif’s government over the course of the last year.

For the most part, numbers cited by the CAO chief painted a grim picture of Egypt’s economy.

El-Malt stated that, according to data provided by the Central Bank of Egypt and the National Investment Bank, net domestic public debt reached LE765.5 billion as of the end of last June, equaling 73.7 percent of Egypt’s total GDP. One year earlier, net domestic public debt stood at LE667.2 billion, or 74.5 percent of GDP.

Although net domestic public debt fell by almost one percent for the period, the numbers are troubling, el-Malt said, with Egypt’s domestic debt remaining among the highest in the Arab world. According to the Joint Arab Economic Report for 2008, released by the Arab Monetary Fund in December of last year, the ratio of internal public debt to GDP stood at 38.2 percent in Jordan; 22.3 percent in Mauritania; 17 percent in Syria; 6.7 percent in Algeria; and 6.6 percent in Yemen.

The proportion of internal and external debt to GDP is one of the factors used to determine how economically secure a country is. To be considered a "safe" country, the ratio should not exceed 60 percent–yet in Egypt, this ratio reached 90.7 percent as of June 2009. According to the CAO, total government debt averaged LE872.5 for each Egyptian citizen in the 2008/2009 fiscal year, up from LE748.2 the year before.

El-Malt also noted that the trade trade deficit, too, was rising. This balance, which contrasts total imports against total exports, is the real indicator of a country’s productive capacities and its ability to meet its own consumer demands. In Egypt, the deficit hit some LE25.2 billion in 2008/2009, up from LE23.4 billion in 2007/2008, representing an increase of US$1.8 billion.

El-Malt also discussed rising inflation. According to national statistics office CAPMAS, inflation rates have consistently climbed over the past five years. In the 2005/2006 fiscal year, inflation stood at 4.2 percent. The following year, inflation rates more than doubled to reach 10.9 percent. In fiscal year 2007/2008, it reached 11.7 percent before jumping again to alight at 16.2 percent for the last fiscal year.

The chief auditor also pointed out that Egypt suffered from low rankings in investment-related indexes. Most important of these indices is the international Doing Business Index, the most recent of which put Egypt at 106th place out of a total of 183 states listed, and 19th among Arab countries covered by the report. By way of comparison, Saudi Arabia came in 13th, Bahrain 20th and the United Arab Emirates 33rd.

In a 2009 report issued by Transparency International, Egypt ranked 111th out of 180 nations listed. Out of the 20 Arab states covered, Egypt came in at 10th place.

El-Malt also pointed to the obstacles that have consistently impeded the implementation of public projects in Egypt, whether at the federal administrative level or by local authorities and public-sector companies. The most notable of these obstacles, he noted, were the following:

1) Insufficient and inaccurate preliminary project studies;

2) The lack of seriousness on the part of certain investors, both foreign and Egyptian;

3) The lack of benefits accruing to the GDP from farmland managed by certain non-Egyptian investors, along with the excessive use of groundwater for irrigating said farmland;

4) Delays in completing the implementation stages of certain projects, with some taking more than 16 years to complete;

5) The failure by certain projects to achieve their stated objectives;

6) And the launch of enterprises suffering from severe technical and environmental deficiencies, which can potentially pose public-health risks.

Several projects were found to suffer from the above-mentioned problems, according to el-Malt, including: Abu Tartour Phosphate project; Sinai Coal project (currently being liquidated); National Covered Drainage project; East Oweinat project; the project for the replacement of sewage and irrigation stations; New Vally project of Darb al-Arbaeen; the establishment of the El-Tawfiqi canal lock; Wadi el-Saaida and Wadi el-Naqra land reclamation projects; East and West Suez projects for land reclamation; major projects situated on the Nile river and its tributaries; North Wahbi River project; Husainiya Village Drainage project; Quta Industrial Zone project; North Motobas Agricultural project; land reclamation projects in el-Hammam, el-Dabaa and el-Alamein; agricultural projects by the High Dam Lake Development Authority; Hurgada Drainage Expansions project; sewage projects in Rafah; the Quseima-El-Contella-Ras Nabq road project; and industrial waste projects in Suez.

The aforementioned problems also apply to certain "mega-projects," such as the Toshka land-reclamation project and the North Sinai development project.

On recent increases in the price of basic commodities, el-Malt noted that prices had risen countrywide during 2008/2009 by 17 percent on the previous year. The government, he added, had failed to control market prices for basic commodities, including fertilizers and building materials.

El-Malt went on to highlight the recent proliferation of certain negative market trends, including: commodities smuggling; saturation of the market with goods of unknown origin; rising numbers of informal street vendors; counterfeit merchandise; and inexplicable price hikes, among others.

Moving on to public health issues, el-Malt noted that the number of Hepatitis C patients countrywide had reached some 7.5 million–almost 10 percent of the total population–according to a Health Ministry survey conducted last year.

A study conducted by the CAO in 2008/2009–covering public health services, health insurance and university hospitals–included several findings regarding the insufficiency of environmental, professional and clinical safety measures, in addition to the absence of appropriate emergency and industrial safety precautions. It also revealed failures to provide medical service to patients in certain hospital departments.

On environmental issues, el-Malt said that in 2008 the largest number of cement-plant chimneys were found to be located in the urban governorate of Helwan, which contained 32 smokestacks accounting for 45 percent of industrial smokestacks nationwide. The finding was indicative of the high degree of air pollution to which the area is subject.

Several sources of contamination were found countrywide due to the discharge of waste from sewage stations in primary drains, el-Malt noted. Numerous sources of contamination have had a negative impact on public health and on agricultural, piscine and animal wealth, he said.

Among the major deficiencies in the fields of general and technical education highlighted by el-Malt were the disconnect between scientific development and school syllabuses; the focus on learning-by-rote; the poor condition of educational facilities; the lack of financial and technical resources; overcrowded classrooms; dependence on multiple school shifts; and the lack of teachers specialized in important areas of study, among others.

On the twin issues of university education and scientific research, el-Malt noted that Egypt’s university system was failing to cope with the developments of knowledge and modern science. Egypt’s universities, he noted, generally suffered from high student numbers compared to low numbers of teaching staff.

Moving to scientific research, el-Malt said that the country did not posses a clear national strategy for research and technology. As for the issue of illiteracy, meanwhile, the CAO head said that the number of illiterate citizens countrywide had reached 17 million.

The number of Egyptians deprived of working sewage services nationwide reached 34.5 million, amounting to roughly 48 percent of the total 2006 population of 72.4 million citizens, he said.

Residents of squatter areas, meanwhile, hit 12.2 million, representing 16.8 percent of the total population, el-Malt pointed out. The most conspicuous problems currently facing these areas are the deterioration of the urban environment, rising unemployment and illiteracy, soaring populations, the lack of health and education services and high rates of water and air pollution, the CAO head concluded.

Translated from the Arabic Edition. 

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