Prime Minister Ebeid address Egypt's major economic challenge on debt
Egypt, Economics, 5/12/2000

Egypt's Prime Minister Atef Ebeid said that the Egyptian market will flourish in the next three months. "The present sluggish activity on the market helped to regulate liquidity and stabilize the exchange rate," Ebeid said.

The Prime Minister told the Cairo Arabic Weekly "Al Mussawar" in an interview which it publishes in its issue of May 12, that stability of the foreign currency market in Egypt, which imports goods to the value of $ 16 billion of production requirements and goods every year, is an issue of life and death and takes top priority.

Ebeid pledged to end the problem of stagnation, in a radical manner, within one year after probing its real causes and dealing with them.

He explained that several factors led to stagnation in the market. He mentioned arrears in government payments, continued expenditure on giant national projects, a gradual decrease in state revenues particularly from the oil sector because of a world drop in oil prices, prospecting for gas and buying the quota of the foreign partner order to raise stored gas reserves. This burdened the state budget.

There was also a decline in tourist revenues and a pressure on foreign currency to import goods without limit. This contributed to the state of stagnation which was witnessed by the Egyptian market.

The government is pumping 1.5 billion pounds monthly to end the state of stagnation. Additional allocations of 13 million pounds have been earmarked in next year's budget in the form of new investments.

Ebeid explained that government expenditure will decrease by 25 per cent to bring it down to within 20 billion pounds. The Egyptian market has accustomed for long years, to seeing large government expenditure which is now beyond the government's capacity. This should be replaced by non-government expenditure.

Ebeid said the government will earmark LE 9 billion of the proceeds of privatization to pay government arrears and will concentrate on activities which increase revenues. Measures will also be expedited to use funds available from abroad in the form of soft loans which have not been used yet.

"The privatization program in Egypt was proceeding smoothly and safely to maintain the social dimension," he said. Twenty per cent of the shares of telephones will be offered for sale this year in addition to trenches of the shares of telephones will be offered for sale this year in addition to trenches of the shares companies which understate the distribution and refining of oil and other companies which have been prepared for privatization, the prime minister said.

There are confirmed tax arrears amounting to 18 billion pounds which are due to the government and steps will be taken to collect them. In addition, state revenues of oil will rise following a rise in its prices. Local production of butane gas will also be increased to lower imports which cost 1800 million pounds annually.

Ebeid said that if there were some negative aspects in the feasibility of some giant national projects, they should be dealt with to make feasibility more effective in these projects in which LE 10 billion have been invested.

He said that work in the port of the East Branch project and the port in the north of the Gulf of Suez will be completed within two months.

Ebeid said in reply to a question that correcting an existing situation or amending a course is not settling accounts by some ministers with the previous government. All are in the nation's service.

Ebeid said the Cabinet will intensify its activities in order to refer several issues to the People's Assembly to have them passed before the Assembly ends its session.

"The government is actively carrying out all its pledges," the Prime Minister said.

Ebeid said in reply to a question that 250,000 young people were appointed up to last month. A total of l5O,OOO were appointed in government posts and 100,000 in business sectors.

Ebeid said President Hosni Mubarak is quite right in stressing that foreign loans should be firmly regulated. He explained that Egypt got out of the problem of debts by a miracle as a result of the political weight of President Mubarak.

Part of Egypt's debts was written off as a result of the President's relations with the US Administration, his relations with Gulf states and his relations with European countries. This will not be repeated in history.

The big reduction in Egypt's debts realized by President Mubarak saved the country from paying $ 18 billion in addition to the burden of installments and annual interest. This helped economy to flourish.

"President Mubarak has asked the government to lay down strict regulations to make borrowing safe, "the Prime Minister said.

Ebeid said that a study indicated that the burden of debt service annual installments and interest up to the year 2026 shall remain within $ 1600 million annually. Egypt is able to pay this and is actually paying it in full without burdening foreign currency resources.

Ebeid said that the World Bank and several countries in addition to Arab funds are offering loans to Egypt with interest ranging from one quarter per cent to 2 per cent, periods of grace up to 10 years and repayment over 20-30 years.

These loans, under these conditions, could almost be considered grants and Egypt should benefit from them on condition that there is need to use them in projects of confirmed and well-studied feasibility.

Ebeid said that a bill will be presented to the People's Assembly shortly stipulating that any quarter which wishes to borrow from abroad should notify the government so that it may have full knowledge of external loans. Following the crisis in South East Asia, all world countries became aware of the necessity of maintaining control on private sector borrowing from abroad, he added.



Asked whether the government could realize a growth rate of 7 % under the present conditions of stagnation, the Prime Minister said agreement was reached with a mission of the International Monetary Fund (IMF) which visited Cairo recently that annual growth rate will be between 5 and 6.5 per cent, inflation rate will be kept within 3 per cent and budget deficit will be within 3 per cent.



The Prime Minister explained that a decision was issued banning the import of used clothes and spare parts because owners of small factories at Shubra AL Khemia complained that they could not market their products and warned that 12,000 textile and garments factory will close down as a result.



Asked about the issue of the demolition of villas and palaces, the Prime Minister said that previous decisions were repealed because they were not sound. Demolition and building should be according to the executive statutes of the Housing Law.

In reply to a question, the Prime Minister said that all advisers working in the government will leave their posts according to a decision which was issued recently that service should not be extended for those who have reached the age of 60.

Previous Stories:
  Egypt's external debts dropped to $28,192,000,000   (5/10/2000)
  Egyptian economy picture is not dim   (5/10/2000)
  Egypt¹s economy strong enough to stand international volatility   (5/5/2000)

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