Economic Prospects for Egypt: A Question & Answer Session

Minister of Foreign Trade Youssef Boutros Ghali, the guest speaker at an AmCham Egypt luncheon on January 8, answered questions from AmCham members about his views on Egypt's economic prospects.

In a brief speech prior to the promised question and answer session, Boutros-Ghali said that Egypt's experiences, and the difficulties it encountered in reforming its economy, were similar to those of other nations. "I have many friends in many countries in posts of responsibility, and I talk to them from time to time," he said. "What's happening in Egypt is no different from other countries."

Moreover, he said, comparing notes with others could inspire hope. "Others have gone through this before and come out better, stronger, better able to cope with the world at large," he said.

Through a process of introspection, he added, "the right answers are gradually appearing" for how to develop Egypt's economy. "The concepts that drive successful economies will take root," the minister promised listeners. "We are institutionalizing the budget constraint," something, he added, that private sector companies must also do.

Subsidies must be evaluated on a case-by-case basis to determine whether the benefits are worth the inevitable costs, he said.

In answer to the "obvious question" of whether the currency would be devalued anytime soon, Boutros-Ghali said he saw no reason for a devaluation in the short term, given Egypt's sound economic fundamentals.

Nevertheless, he expressed some regret about Egypt's long lack of a monetary policy. "For 40 years, we've had a policy of no policy," he said. "But things are changing."

He pointed to lower deposit rates and predicted that interest rates would follow suit. The policy comes "a bit late, but it's there, and it's beginning to bite," he said, emphasizing the need to establish strong institutional support for a market-driven economy.

The minister also said that increasing tourism and commodity exports - which account for 12 percent of the country's earnings - could help drive the economy. But for this to be achieved, he said, private sector businesses must apply international standards to their practices, while the government must dismantle bureaucratic obstacles to importing or exporting products. He noted that long delays at customs terminals would be remedied once all 18 ports are fully computerized this March.

Boutros-Ghali also addressed the status of the Central Bank of Egypt (CBE), arguing that despite the seeming influence the government over CBE policy, the bank is, in fact, in independent body.

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