Accelerating economic reforms
Egypt, Economics, 4/6/2002

Egyptian economy has not yet reached a crisis stage; it is only facing a state of sluggishness. The momentum of the government's economic reform that started in 1991 can speed up the performance of the Egyptian economy, said executive director of the Egyptian Center for Economic Studies, Ahmed Galal.

He added that Egypt is still able to repay its debts and there is no sudden escape of capitals and deposits are stable as well. This means that Egypt is safe, he affirmed.

Galal noted that this state could be alleviated through implementation of a package of economic reforms. On the short-term, Egypt needs expansive monetary policy aiming at reducing interest rates and generating more liquidity. This is in addition to accession of the Euro into Egypt's currency basket since Europe is Egypt's key trade partner.

Export is another life or death issue. Egypt needs adequate reforms for promoting this important economic activity through fine-tuning a competitive exchange rate and introducing lower interest rates and taxes than those applied in targeted foreign markets, Galal concluded.

In his prescription for overcoming the current situation the Egyptian economy faces, former minister of economy, Sultan Abu Ali said that there must be a kind of tax reform since current rates imposed on economic businesses and activities are higher that the limits that may boost economic reform. Income tax has to be cut by 20-30% along with canceling investments tax exemptions.

Abu Ali also remarked that privatization process should be prompted especially through activating stock exchange and expanding popular capital, i.e. selling for small investors, and avoiding overestimating shares of companies to be privatized.

Moreover, Egypt has to seize available opportunities in light of globalization by means of enhancing efficiency of all related fields, keeping abreast of the changes of the age and the make the best use of available resources, added Adu Ali.

In the same vein, ex-minister of tourism, Fouad Sultan believes that the Egyptian economy must regain the confidence of national and foreign business sector.

This can be attained by maintaining relative stability of national economy in terms of general budget deficit, inflation rate and exchange rate with a view to sustaining general investment climate and encouraging inflow of national and foreign capitals, Sultan noted.

He also added that elements of structural reform of the Egyptian economy must be completed. These elements include legislative and supervisory structure, tax reform, amending labour and housing laws, developing capital market, reforming and liberalizing banking system and insurance and pension institutes to cope up with the shift to market economy.

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