Economic reform enters second stage; subsidies replacement being studied
Egypt, Economics, 5/30/2002

In light of the economic woes caused by the September 11 attacks in the United States, Egypt is reconsidering subsidising basic commodities, Finance Minister Medhat Hassanein said on Monday night.

The US incidents dealt a heavy blow to Egypt's tourist industry, a key hard currency earner.

Hassanein, speaking at the closing session of an economic conference, said: "One key pillar of the second stage of economic reforms is to reform subsidies. Intensive discussions should be conducted throughout the current fiscal year regarding [government] subsidies." He added that the discussions should focus on whether to continue to offer subsidised supplies or to partially replace them with financial assistance.

"Like many other countries, Egypt is suffering from the aftermath of the September 11 attacks. We have consulted many donor countries and institutions on the agenda of the reforms," Hassanein told the conference.

"Economic reforms are a very important way forwards, but not the only one," he added.

Hassanein said that the economic reform - which the country started in earnest in the early 1990s - included monetary, financial and legal issues.

"It also tackled the foreign exchange rate and the necessary economic data and information.

These issues should, however, be treated as one package," he said.

The minister also stressed the importance of institutional reforms in Egypt.

"The success of the latest stages of reform hinges on adopting new working methods and new management cultures," said Hassanein.

He reiterated the government's commitment to encouraging the private sector to play an increasing role in development within the free market economy.

"The private sector should play an important and active role as a partner in the development. It should also step up contributions in the local market," he said.

He added that, within the second stage of reform, his ministry had prepared a new comprehensive tax law.

"The draft law has been revised by the Legislative Department of the Justice Ministry. A final blueprint will be prepared and submitted to parliament," he said.

Hassanein said that the second stage of reform would also include a new customs law and air-tight programmes to modernise the management of customs and taxes authorities.

"The modernisation will include the premises and staff-training programmes to improve the performance and, eventually, the revenues of these authorities," Hassanein said.

The minister said that earlier this month the government had completed payment of its arrears, which were estimated to be LE22.3b.

"In the new budget of 2002-3 no projects will be financed without serious feasibility studies," he said.

He added that all state-run agencies were able to pay the annual installments of their debts, except the Railway Authority.

"The number of passengers using the railway utility is estimated at 800 million every year but the authority's revenues do not exceed LE400m," Hassanein said, adding that the Railway Authority's losses drain LE1.7b from the state's budget every year.

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