Politics aside, how can the prime minister-designate save the economy, Sherine Abdel-Razek asks Choosing former prime minister Kamal El-Ganzouri to form the new government has polarised debate in Egypt, as while some see him as another former president Mubarak lackey, others believe he is an economic saviour with clean hands and an eye set on the poor. While protesters in Tahrir Square insist on rejecting El-Ganzouri and call for a salvation government headed by presidential hopeful Mohamed El-Baradei, El-Ganzouri has been busy forming the new government expected to swear in today. During his tenure as prime minister (1996-1999), El-Ganzouri, 78 years, was dubbed minister of the poor because he succeeded in lowering the poverty rate from 25 to 21 per cent. His popularity on this level makes the Supreme Council of the Armed Forces (SCAF) believe he is the right man for post-revolution Egypt since one of the main reasons behind the 25 January uprising had been social injustice and disparity in income levels. Nevertheless, this does not resonate with people seeing him too old to deal with the demands of a revolution masterminded by youth. "Being old is an asset as he spent decades of his life dealing with Egyptian bureaucracy," said Ismail Hassan who was the governor of the Central Bank of Egypt (CBE) when El-Ganzouri was in office. "Furthermore, he has always been clean handed, trustworthy and anti-corruption. His main assets, though, are his good administrative and economic backgrounds," Hassan added. The four-year period he headed the government witnessed many international and national crises which made El-Ganzouri's task difficult as he had to deal with the aftermath of the Luxor massacre where 57 tourists lost their lives at the hands of terrorists in 1997. That was followed by the Southeast Asian economic meltdown and the tremors that occurred in both Brazil and Russia. However, he succeeded in balancing the budget -- the deficit has now expanded sharply -- and reined in inflation to a modest 3.6 per cent and guarded the exchange rate despite the inevitable depletion of reserves. The dollar exchange rate was LE3.47 back then. "The economic woes of that period resemble what we have on ground now and this is why I believe he is the perfect choice for the time being," said Hani Genena, senior economist at Pharos Securities, a leading local investment bank. "We have a widening budget deficit, a depreciating currency, high inflation rates and international markets that are muddling through their problems," explained Genena. Genena and Hassan agree that the new cabinet will definitely have protecting the pound as a top priority. "He has done it before and this is what the CBE has been doing for a while now, so most probably they will adhere to it until it is stabilised to give investors positive signs," said Hassan. Foreign reserves have tumbled $14 billion since the end of 2010 to $22 billion in October, as the uprising has shaken confidence. The Egyptian pound slid to its weakest to the US dollar since January 2005 to exceed the LE6 threshold. El-Ganzouri's good relations with the International Monetary Fund (IMF) stand Egypt in good stead as it considers borrowing money from the international organisation to deal with its lack of liquidity. It was in September 1998 when Egypt and the fund concluded their third and final two-year stand-by agreement which witnessed many improvements on the economic indicators and income inequality. "El-Ganzouri played a key role in improving relations with the IMF and World Bank. So, given the fact that Egypt is in urgent need of external funding from the IMF, or elsewhere, he appears to be an ideal candidate," wrote Said Hirsh, Middle East analyst at the London-based consultancy firm Capital Economics. Although the SCAF preferred not to resort to foreign borrowing, it has now changed tack and is requesting cash from the fund. But the international economic crisis makes negotiations difficult, a task that El-Ganzouri's track record would make easier. But Hirsh said much depended on whether El-Ganzouri was given the full powers he asked the army for. It remains to be seen if his and the army's definitions of full power are the same. Soon after Mubarak's resignation, El-Ganzouri was all over the media criticising the fiscal and economic policies of Nazif's government. In an interview published in mid-February, he openly criticised lowering customs saying that while the value of customs had been LE11 billion on total imports of LE18 billion in 2004/2005, the value of imports came at LE49 billion and customs were LE14 billion in 2010. Also, he is an opponent of reducing tax rates saying that even rich countries cannot afford this. "I think that while maintaining an austere monetary policy based on increasing interest rates and protecting the pound, he would follow a conservative borrowing policy and might depend on increasing revenues like taxes," said Genena. Genena points out that a progressive tax implementation is very possible as well as a tax on securities transactions. Both Genena and Hassan, however, believe that the hardest task for El-Ganzouri to stabilise the economy would be gaining security back. "We are lucky that despite the revolution and the chaos that followed, we still have all production means in good shape. For example, we did not destroy a single factory or a hotel. All what is needed now is a feeling of security so that we can operate the production wheel at full capacity." El-Ganzouri was known by his adoption of mega-national projects like Toshka and the second underground line. However, it is totally out of the question now that he would include any project of the sort in his plan. "The main priorities now are bread, butter and security," said CBE's Hassan.
