Sharm El-Sheikh Conference, donors agree on more financial streamline
Egypt, Economics, 2/27/2002

The recent Sharm El-Sheikh conference, which grouped dozens of world donors, probably agreed on two key points, namely, supporting Egypt financially after the September 11 attacks and maintaining full Egyptian economic reforms, said experts following the two-day meetings.

All participants in the Red Sea resort meetings saw that the problems currently facing the Egyptian economy were a result of the September 11 attacks and the slowdown witnessed by the economy prior to the attacks.

"The ten billion dollars pledged by the donors over the coming three years would assist in enhancing Egypt's growth rate and attracting foreign direct investments," said Head of the World Bank mission in Cairo Mahmoud Ayub.

Both the government and the donors saw eye to eye on the necessity of having a flexible exchange rate in the future.

The government, on its part, proposed an eleven-point program on financial reforms.

Although reports had referred to some differences between Egypt and the donor countries regarding the exchange rate, yet the concepts proposed by the donors in the gathering were not so different from that of the government.

Egypt, on its part, reiterated that it would maintain adopting a more flexible exchange rate based on supply and demand forces.

However, experts believe that it is not in Egypt's interest to have a 100 per cent flexible exchange rate, a move that may lead to over shooting.

Such exchange rate does not reflect supply and demand as much as it will be a mere speculation, according to head of the Egyptian centre for economic studies Ahmed Galal.

These speculations lead to imbalances of the exchange rate, foreshadowing on prices and deficit rates, Galal added.

On the other hand, the US delegation to Sharm El-Sheikh gathering called for further reforms by Egypt to back the private sector.

There was a consensus that dealer, whether producers, importers or investors, need more transparency and decision consistency, a point that was well taken by the government.

Many observers feel that the coming phase will demand more difficult reforms in nature based on structural ones that mean more openness in terms of foreign trade and customs tariffs which highly affect Egyptian exports.

The European Central Bank noted that Egypt needs other financial reforms in order to have enough level of competition and ease the control of public banks over the financial sector.

As a remedy, the bank urged for strengthening monitoring and supervision over banks, a move that requires certain measures to enhance competition and launch banks' privatization

"The structural reforms involve several aspects, including restructuring infrastructure as well as the framework of the activities of the private sector," Galal said.

Regarding the social fund for development (SFD), the donors saw that the fund has a good role, expressing their willingness to provide the necessary funds for it.

However, others called that the SFD be transformed into a self-generated fund.

A third party called that the fund should not be an alternative for bodies dealing with the problems of poverty and unemployment.

In spite of its vital role, the fund cannot redress the entire problem of unemployment, which should be handled within the context of a more comprehensive strategy, experts said.

The International Monetary Fund (IMF) reiterated the importance of an overall structure not only limited to the exchange rate, which is just a part of a programme on realizing a balance in the financial and monetary policies, but also to fill the gap in the balance of payments and activate the economy.

Previous Stories:
  Ghali: $1.9 Billion Increase in Exports   (2/26/2002)
  Egypt to host soon international conference on energy   (2/26/2002)
  Egyptian exports to Iraq   (2/26/2002)

Please add a link on your webiste pointing to ArabicNews.com and bookmark ArabicNews.com & subscribe to our daily email news bulletin.

Search