As the summer and holiday season draws to a close, the annual investment season begins: economic conferences, government visits, delegations of investors and analysts from around the world. This year is no different, though there is increased interest in in Egypt as a result of its economic reform program started late last year and still ongoing. This program —including the floating of the pound, the Introduction of a VAT, the increase in energy prices, and the IMF deal—resulted in improved macroeconomic indicators, as demonstrated by the stable exchange rate, increased Central Bank reserves, and higher growth rates. But those same economic decisions have also resulted in steep price hikes, a larger domestic and foreign debt, and higher domestic financing costs. This is all while unemployment remains high and public services continue to deteriorate. Thus what the government sees as economic reform looks to most Egyptians like a declining standard of living and an inability to make ends meet, even after the latest boosts to cash subsidies and pensions. I don't think the government is unaware of this, but it views these widely hated measures as necessary for the public interest, necessary steps that had to be taken. It is also, in my opinion, betting on the fact that they will spur higher growth as the new gas fields in the Mediterranean come on line, tourism gradually returns, investment increases, and Egypt continues to receive international backing for its counterterrorism efforts. This will be enough, the government believes, to turn the national economy around and improve citizens' lives. Personally I think the government was right that its measures were necessary to avoid economic collapse. But even if all their projected benefits come to pass, economic growth alone will not be enough to ensure the economic and social development needed to improve citizens' standard of living. It must be paired with policies and programs designed to social ensure more justice. This isn't a call to step back from recent decisions or to accept the profound structural flaws in state finances which threaten the future of the country. It is rather a call to find a sound balance between policies that bring rapid economic growth and those that ensure social security and a dignified life for the citizenry. In practical terms, this means that employment must be the chief pillar in the state's economic program. A job is the most effective form of social security, the right of every citizen, the source of sustainable development, and the basis of genuine stability. It's hard to speak of impending stability and prosperity given current unemployment rates, especially youth unemployment which stands at nearly 40 percent. Moreover, there may be no choice but to increase tax revenue in order to enable spending on public services and infrastructure. But with all due respect to the efforts of the Finance Ministry and the Tax Authority to improve collection rates, the magnitude of the financing gap requires more effective measures to combat tax evasion. It also requires tax increases that shield low-income groups, perhaps a higher income tax rate on top earners, a higher property tax, and limits to excessive exemptions. Finally, equitable development requires a reconsideration of public spending priorities, especially when it comes to megaprojects. I have no objection in principle to spending on infrastructure to increase demand, create jobs, and stimulate the economy. But we must consider such standards when selecting new projects to fund, especially when this means foregoing spending on existing infrastructure and services which can provide better living conditions for the majority of citizens. So I welcome delegations coming to Egypt in search of investment opportunities, and it certainly pleases me to see the kind of growth we've missed for many years now. But let us remember that the real standard of success for economic policy is the security and stability it generates for citizens, not the accolades and distinctions granted by international analysts. And let us learn from other countries and our own past experience that the gap between improved macroeconomic indicators and declining living standards is what most threatens a country's stability and social peace.
