Prime Minister Atef Ebeid's annual policy statement -- with its warning of further economic woes for the nation -- was unlike the upbeat reports of previous years. Gamal Essam El-Din reports Prime Minister Atef Ebeid began this year's annual policy statement -- delivered in parliament on 28 December -- on a pessimistic note. Unlike in previous years, which featured speeches filled with lists of impressive achievements and bouquets of rosy promises, Ebeid was, for the most part, down-to-earth and subdued. He said Egypt's severe economic recession and the hardships it had spawned were unprecedented; and the ramifications would be felt for a while yet. According to Ebeid, global economic and political upheavals -- ranging from the financial meltdown in Southeast Asia in 1997 to the 11 September attacks in 2001, the Israeli-Palestinian crisis and the wars in Afghanistan and Iraq -- had forced the world economy into a deep slump. Foreign exchange markets were imbalanced, and prices of food commodities and production inputs had surged astronomically. "The pinch has been felt [all over the world]," he said, "and especially in the developing world." In practical terms, that translated into the declining purchasing power of the majority of citizens. Ebeid said President Hosni Mubarak had given him strict orders to make helping the poor his top priority and a cornerstone of the government's future strategy. "We have a strong and clear-cut commitment to shield the poor from external shocks," he said. Forty per cent, or LE63.8 billion, of the current 2003/2004 budget is devoted to this end, including an additional LE1.6 billion in subsidies meant to stabilise prices, Ebeid said. The annual policy statement comes amidst calls from the People's Assembly and ruling National Democratic Party businessmen for major cutbacks in subsidies as an important step towards narrowing the budget deficit and achieving fiscal prudence. The opposition also thinks that subsidies are mainly meant to serve NDP leaders' political needs, and may end up backfiring, as the economic situation gets worse. Ebeid admitted that the economic picture was not getting prettier. "First, the 4.6 per cent growth rate we promised some years ago has now become a big problem. The foreign economic assistance we used to [get] has been reduced to a trickle." He also said remittances from Egyptians working abroad had gone down, because most markets had opened up and Egyptians were getting a smaller share of the overall foreign work pool. At home, the population had soared to 70 million. "Even worse," the prime minister said, "the majority strongly believe that they have an established right to services and goods free-of- charge or at subsidised prices... despite the fact that Egypt imports half of its needs, [the prices of which] have climbed by more than 50 per cent in just a few months." Ebeid placed stock in cementing relations with powerhouses like the United States, the European Union (EU), Japan, and China because "it is highly essential to promote our trade and raise the competitiveness of our products in these markets." Stabilising Arab world politics, and "doing our best to promote economic relations with the Arab world," was also a key task, as was turning Egypt into a link between the Middle East and Africa. Despite the dire prognosis, Ebeid said his government was committed to dealing with "seven challenges" in the next period. Unsurprisingly, ensuring that basic food goods -- and especially bread -- remain available to poor and limited- income citizens all the time at subsidised prices -- topped the list. The challenge comes amidst last summer's sudden 40 per cent increase in the prices of basic food goods, and the reappearance of queues for subsidised bread. Public protests against the government had also become more visible. Demonstrations organised by the leftist Tagammu Party as recently as 24 December had called for President Hosni Mubarak to fire Ebeid "for his poor policies which favour the pampered elite at the expense of the unprivileged masses". Ebeid said the government itself would assume full control of providing bakeries with their flour needs. Entrusting the private sector with the task of providing flour to bakeries, government experts think, resulted in serious market shortages that deeply affected the poor. Ebeid also promised that the foreign exchange required for importing wheat supplies would be available at all times. The second challenge, according to Ebeid, involves radical fiscal reform in terms of slashing the public debt and tackling the budget deficit. "You all know that most of the government's income comes from Suez Canal transit fees, oil sales, and custom and tax revenues. As most of these are by no means sufficient, we developed a habit of borrowing money." Egypt's public debt is not that big, Ebeid said, but it is growing all the time. Domestic debts rose from LE221.2 billion (58.3 per cent of GDP) last year, to LE252.2 billion (60.8 per cent) this year, while the budget deficit rose from LE25 billion to 40 billion. Ebeid said 2002/ 2003's balance of payments results were very encouraging, going from a $456.3 million deficit last year to a surplus of $546 million in 2002/ 2003. He said the fact that foreign debts remained stable at $28.7 billion was another healthy sign. The prime minister said that growth rates -- currently at 4.2 per cent -- would climb to 4.5 per cent in the next period, and that the country's GDP rose from LE379.1 billion (3.1 per cent) last year to LE415 billion (3.2 per cent) in 2002/ 2003. But tackling fiscal imbalances, he said, would require selling public assets against debts, disposing of unsold inventories, and adopting cost-saving measures. The government was also planning on generating more income from increasing sales of high-quality oil products and promoting tax revenues. The government's third challenge is bringing stability to the foreign exchange market, which has been in disarray since the summer of 1998. Ebeid's sudden decision to float the Egyptian pound on 28 January 2003 was the main catalyst for the 40 per cent surge in food prices that brought on a torrent of criticism of his government. The prime minister argued that when he took the flotation decision last January, the climate was ideal. "The problem is that some use it to speculate and [make a lot of money]." He blamed "some exporters" for swamping the market with "speculative activities" and hoarding their foreign exchange revenues. "We have encouraged [exporters]... to deposit three quarters of their foreign exchange receipts to banks. This is quite enough to meet the market's needs and prove they are loyal to the supreme interests of their country," Ebeid said. The support the government had been giving exporters over the years must now start paying off, he said. "They have to boost their exports," he said, perhaps "learn that Thailand, a country with the same population as Egypt, earned $60 billion, or 10 times Egypt's export revenues." Another tactic to balance the exchange market is a public sector bank plan to offer dollar- denominated saving accounts at a one and a half per cent higher interest rate than the global level (currently set by America's federal reserve bank at one per cent). This, Ebeid argued, would discourage people from hoarding dollars. The fourth challenge for Ebeid is fighting unemployment. "Every year, the government is required to find jobs for as many as 600,000 young graduates. This is an impossible job because the government can only create 150,000 job opportunities a year." Ebeid said that all sectors of the society -- and not just the government -- were responsible for fighting this problem. The fifth challenge -- curbing the runaway growth of the population -- is the most serious, Ebeid warned, and could be clearly seen in "the widening food gap and an expensive bill of imports". The government has designed a three-year programme aimed at ensuring that marriage laws (that prohibit girls from marrying at a very early age) in poor districts are enforced. Ebeid asked "MPs to help us ensure that these laws will be applied without the use of force". Ebeid's sixth challenge deals with protecting agricultural land from rapid urbanisation. "In 1950, the population was 20 million, with six million feddans of cultivated land. [At] 70 million, we need 21 million feddans for our food needs," Ebeid said. And yet Egypt's maximum cultivation level is just 11 million feddans (based on an agreement restricting Egypt's quota of Nile water to 55 billion cubic metres a year). One thing the government can do, Ebeid said, is to enforce a strict ban on building on agricultural land. "Instead, the government will encourage the building of new desert housing communities, while a new law regulating the relationship between real estate tenants and landlords is being drafted to encourage investing in housing projects," Ebeid said. The seventh and final challenge is reinforcing confidence in the banking sector. Here, Ebeid unveiled a new initiative aimed at inviting fleeing loan defaulters to settle their disputes with banks. "This is a final invitation to all loan defaulters interested in finding a solution to their problems," Ebeid said. "They have to provide a complete list of their possessions in Egypt and abroad, and negotiate a new timetable with the banks to repay their loans." The grace period will last a month. The prime minister, meanwhile, will soon be facing a plethora of interpellations at the People's Assembly. In the next few weeks, he will be grilled by MPs regarding the floatation of the Egyptian pound, corruption in the banking sector, the gap between the government's promises and its performance, the lack of harmony and teamwork in the cabinet, vote- rigging of parliamentary elections, and the need for more democracy.
