News / Economy

Egypt's New Finance Minister Plans Stimulus, Not Austerity

This screen grab from state television shows Egypt's interim President Adly Mansour (R) swearing in Ahmed Galal (L) as finance minister in Cairo, July 16, 2013.This screen grab from state television shows Egypt's interim President Adly Mansour (R) swearing in Ahmed Galal (L) as finance minister in Cairo, July 16, 2013.
x
This screen grab from state television shows Egypt's interim President Adly Mansour (R) swearing in Ahmed Galal (L) as finance minister in Cairo, July 16, 2013.
This screen grab from state television shows Egypt's interim President Adly Mansour (R) swearing in Ahmed Galal (L) as finance minister in Cairo, July 16, 2013.
Reuters
Egypt interim government will seek to avoid major austerity measures and instead work to stimulate the economy by improving security and pumping in new funds, the new finance minister, Ahmed Galal, said on Thursday.
 
The government, sworn in last week after the military ousted Islamist president Mohamed Morsi, inherits a budget deficit that since January has been running at around $3.2 billion a month, equivalent to almost half of all state spending.
 
It has been armed with $12 billion in aid from Gulf Arab countries who welcomed Morsi's removal. But with tens of thousands of pro-Morsi protesters on the street, it is under intense pressure to avoid unpopular steps such as increasing taxes or reducing spending on energy and food subsidies, which eat up a quarter of the budget.
 
“One of the important tools to deal with the budget deficit is stimulating the economy,” Galal told reporters at a briefing. “Stimulating the economy means tax revenues will increase and, in turn, the deficit will decrease,” said Galal.
 
An important step, Galal said, would also be to improve security and political stability after 30 months of political turmoil since Hosni Mubarak was toppled as president in a popular uprising.
 
“Political agreement is the best and shortest route to revive the economy because, if there is stability and security and agreement, tourists will come back and local and foreign investors will be more keen on investing,” Galal said.
 
“We will seek to pump more new funds into the economy and not follow austerity measures. We do not want to increase taxes sharply, that is if we increase them at all, and we do not want to lower spending in a way that will slow a revival of the economy,” said Galal.
 
IMF loan not priority
 
The comments on the government's economic policies are some of the most detailed since it was sworn in on July 16. Last week Galal said his main objectives were “fiscal discipline, macroeconomic balance, stimulating the economy to create jobs and achieve social justice, and efforts to have the fruits of growth reach all segments of society, especially those with low incomes”.
 
Galal on Thursday played down talk of resuming negotiations for a $4.8 billion International Monetary Fund loan that Morsi's government had been working on since August, which he said last week was only “part of the solution” to Egypt's problems.
 
The loan would be conditional on deregulation measures including a reduction in food and fuel subsidies.
 
Galal said it was more important for the government, only days into its tenure, to produce a package of economic policies first, which could take about a month to draw up.
 
“I'm not against dealing with the IMF within this framework, because it brings us credibility and new funds. There are advantages to dealing with the fund to achieve the aims you are after. But that doesn't mean that it is my starting point,” Galal said.
 
“We indeed want to make reforms. We need to make them, irrespective of the IMF,” he added.
 
The IMF for its part said on Thursday it would not resume loan talks with Egypt until its interim government gained international recognition.
 
Galal said the government would press ahead with a system of smart cards to limit the smuggling of subsidized products.
 
The government has yet to decide whether to amend the budget that Morsi's government drew up for the current fiscal year, which began on July 1, he said.
 
Galal said he had no problem tapping into Islamic sukuk bonds, which Morsi's government had been developing, but that it would not be a main tool for raising funds.

You May Like

Video One Year After Thai Coup, No End in Sight for Military Rule

Since carrying out the May 22, 2014 coup, the general has retired from the military but is still firmly in charge More

Goodbye, New York

This is what the fastest-growing big cities in America have in common More

Job-Seeking Bangladeshis Risk Lives to Find Work

The number of Bangladeshi migrants on smugglers’ boats bound for Southeast Asian countries has soared in the past two years More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Turkey's Main Opposition Party Hopes for Election Breakthroughi
X
May 22, 2015 10:23 AM
Turkey’s main opposition Republican People’s Party has sought an image change ahead of the June 7 general election. The move comes after suffering successive defeats at the hands of the Islamist-rooted AK Party, which has portrayed it as hostile to religion. Dorian Jones reports from the western city of Izmir.
Video

Video Turkey's Main Opposition Party Hopes for Election Breakthrough

Turkey’s main opposition Republican People’s Party has sought an image change ahead of the June 7 general election. The move comes after suffering successive defeats at the hands of the Islamist-rooted AK Party, which has portrayed it as hostile to religion. Dorian Jones reports from the western city of Izmir.
Video

Video Europe Follows US Lead in Tackling ‘Conflict Minerals’

Metals mined from conflict zones in places like the Democratic Republic of Congo are often sold by warlords to buy weapons. This week European lawmakers voted to force manufacturers to prove that their supply chains are not inadvertently fueling conflicts and human rights abuses. Henry Ridgwell reports from London.
Video

Video Class Tackles Questions of Race, Discrimination

Unrest in some U.S. cities is more than just a trending news item at Ladue Middle School in St. Louis, Missouri. As VOA’s Kane Farabaugh reports, it’s a focus of a multicultural studies class engaging students in wide-ranging discussions about racial tensions and police aggression.
Video

Video Mind-Controlled Prosthetics Are Getting Closer

Scientists and engineers are making substantial advances towards the ultimate goal in prosthetics – creation of limbs that can be controlled by the wearer’s mind. Thanks to sophisticated sensors capable of picking up the brain’s signals, an amputee in Iceland is literally bringing us one step closer to that goal. VOA’s George Putic reports.
Video

Video Afghan Economy Sinks As Foreign Troops Depart

As international troops prepare to leave Afghanistan, and many foreign aid groups follow, Afghans are grappling with how the exodus will affect the country's fragile economy. Ayesha Tanzeem reports from the Afghan capital, Kabul.
Video

Video Poverty, Ignorance Force Underage Girls Into Marriage

The recent marriage of a 17-year old Chechen girl to a local police chief who was 30 years older and already had a wife caused an outcry in Russia and beyond. The bride was reportedly forced to marry and her parents were intimidated into giving their consent. The union spotlighted yet again the plight of many underage girls in developing countries. Zlatica Hoke reports poverty, ignorance and fear are behind the practice, especially in Asia and Africa.
Video

Video South Korea Marks Gwangju Uprising Anniversary

South Korea this week marked the 35th anniversary of a protest that turned deadly. The Gwangju Uprising is credited with starting the country’s democratic revolution after it was violently quelled by South Korea’s former military rulers. But as Jason Strother reports, some observers worry that democracy has recently been eroded.
Video

Video California’s Water System Not Created To Handle Current Drought

The drought in California is moving into its fourth year. While the state's governor is mandating a reduction in urban water use, most of the water used in California is for agriculture. But both city dwellers and farmers are feeling the impact of the drought. Some experts say the state’s water system was not created to handle long periods of drought. Elizabeth Lee reports from Ventura County, an agricultural region just northwest of Los Angeles.
Video

Video How to Clone a Mammoth: The Science of De-Extinction

An international team of scientists has sequenced the complete genome of the woolly mammoth. Led by the Swedish Museum of Natural History in Stockholm, the work opens the door to recreate the huge herbivore, which last roamed the Earth 4,000 years ago. VOA’s Rosanne Skirble considers the science of de-extinction and its place on the planet
Video

Video Blind Boy Defines His Life with Music

Cole Moran was born blind. He also has cognitive delays and other birth defects. He has to learn everything by ear. Nevertheless, the 12-year-old has had an insatiable love for music since he was born. VOA’s June Soh introduces us to the young phenomenal harmonica player.

VOA Blogs

World Currencies

EUR
USD
0.8957
JPY
USD
120.93
GBP
USD
0.6393
CAD
USD
1.2199
INR
USD
63.470

Rates may not be current.