Economists express concern over Egypt's rising debt

A vendor works at a vegetable market in Shubra outside of Cairo. [Mohamed Abd El Ghany/Reuters]

A vendor works at a vegetable market in Shubra outside of Cairo. [Mohamed Abd El Ghany/Reuters]

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Economists in Egypt have expressed concern about the country's economy following the finance ministry's forecast of a high budget deficit for 2012.

The government raised its predicted budget deficit to 150 billion pounds ($24.8 billion), up from 134 billion (22.2 billion) in a preliminary estimate, according to deputy finance minister Abdul Aziz Mohamed Tantawi on Monday (March 12th).

Finance Minister Mumtaz al-Saeed, however, denied the figures the next day, saying in a statement on the ministry's website that the government's recent reform measures to reduce the deficit were successful.

He predicted the deficit would not exceed 144 billion pounds ($24 billion).

The Central Bank of Egypt revealed that the nation's total domestic debt was 1.1 trillion pounds ($187.4 billion) at the end of 2011, the highest in the nation's history.

Discrepancy in figures 'does not matter'

"The discrepancy in the figures that the government released about the size of the deficit does not change anything," Fakhruddin Awadallah, professor of economics at the University of Ain Shams, told Al-Shorfa. "The debt announced by the Central Bank is very large, and it will have a negative effect on the Egyptian economy and the people if the government and official agencies do not take urgent steps to address the situation."

He said an economic recovery needs to pass through three stages, starting with measures that pump liquidity into the markets with a focus on small and medium businesses and measures that provide support for certain industries.

"The second stage includes measures that ensure liquidity over the medium term, reviving tourism and establishing industrial cities in all provinces to support local markets with medium-sized industries," Awadallah said.

He said the third phase should focus on heavy industries, exports and the technology sector, fields which can secure large amounts of foreign currency "and will be a safety net for the Egyptian economy".

The Central Bank of Egypt announced earlier a decline of 63.3 billion pounds ($10.5 billion) in net foreign assets in the banking system, which represents a 25% drop in the first half of the current financial year.

"The economy's current conditions necessitate an open door policy for all areas," said Hamed Majdi, a professor of economics at the University of al-Azhar. "The political sensitivities that some individuals exploit should be stopped, particularly regarding loans, aid and foreign grants, especially since many are suspended because of the current situation."

Borrowing from the GCC

Majdi said borrowing or requesting some assistance from the Gulf States is a suitable solution for everyone.

"Saudi Arabia announced its intention to allocate $3.75 billion and also announced a payment of $500 million, in addition to offering benefits in kind. But the Egyptian government has yet to outline its priority projects for the Saudi Fund for Development to consider," Majdi said.

Zahed Abdul Karim of the Ministry of Industry and Foreign Trade's chamber of industry said the ministry prepared an urgent plan with an initial focus on assisting entrepreneurs whose businesses are struggling financially. He said approximately 2,000 medium and small plants are in that group.

"In general, the ministry is acting as if it is in a state of emergency regarding how it is implementing the cabinet's decisions to stop the bleeding of the economy," he said.

Abdul Karim said officials might seek assistance from local and foreign banks to provide financing to fund projects that were delayed.

Work is also under way to lessen customs fees through tax rebates and short term exemptions in order to ease the pressure on supporting banks, he said.

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    محسون عادل

    2012-4-25

    For a long time and since the days of the former regime, the Egyptian economy has been suffering from painful blows. This is due to the acts of theft that were done by the former officials, but this was not effective in the street, because all that the simple citizen cares for is to get the basic needs of life. But the majority of the simple citizens did not have this right during the days of the revolution that caused the Egyptian economy to lose a billion dollars. That hit was extremely painful, and this problem has led to the possibility of Egypt’s bankruptcy. Some of the experts on the economy have made several attempts to make the Egyptian economy stable to some extent, and indeed, they have controlled it and limit the danger of bankruptcy. The economy is greatly affected by the movement of selling and purchasing in the domestic and global markets. The Egyptian revolution has led to the weakening of the Egyptian economy during several stages, but not due to the revolutionaries, while the reason behind that were the crimes that were carried out by the former regime against those patient people. The Egyptian economy will not improve unless an increase in production power takes place. The agricultural and industrial movement should be increased, to increase production in Egypt, so as elevate the Egyptian economy to a better status. I wish the Egyptian economy would improve, but the more important thing that we wish is that its impact would be clearly positive on the Egyptian citizens with all their categories. May God keep Egypt from every evil.

  • حسين

    2012-4-17

    Egypt and the Egyptians are going through a very difficult situation during the past months because of unemployment, which affected most of the classes of society. Furthermore, the continuation of the tensions between the parties and the demonstrations in this city or that affected the businesses severely and led to stoppage of many commercial activities and private works as well as importation. The unemployment in Egypt increases significantly and, as I see, unemployment will cause more worries about the future of this country in addition to many evil complications. Hence, unemployment in Egypt is undeniable and it is the main problem these days. However, it cannot be solved as long as the internal situation in Egypt is disturbed and as long as there are many closed factories and plants after expelling their employees and workers, adding more numbers of the unemployed citizens.

  • عبدالرحمن

    2012-4-17

    The circumstances through which Egypt is going through led to change in many things and had negative influences on the Egyptian citizen directly. These circumstances also led to unprecedented increase in the prices of the poultry and meat that doubled overburdening the Egyptian families and many of these families could not buy meat or chicken, which became absence from their tables because of their unaffordable prices.

  • حسن داود

    2012-4-17

    The issue of unemployment in Egypt increases little by little and the problem of unemployment in this Arab country, becoming one of the main problems that cause serious troubles. After the success of the revolution in Egypt and aspiration of many of the Egyptian youth to end many of their troubles, including the problem of unemployment, many youths and their families were surprised by the remarkable rise in unemployment rates because of the continuous internal problems in this country and lack of stability. These factors led to stoppage of the investments, projects and tourism, on which many youth depend through carrying out private businesses. Many of the businesses today almost stopped in Egypt and this is the reason we see this significant rise in the unemployment rates in Egypt.

  • مهدي

    2012-4-9

    Unemployment is a major problem in Egypt, given that the majority of the Egyptians are suffering from it. These people have done everything in order to earn a living which has become a very difficult issue given the difficult and harsh conditions which the Egyptians were going through during the era of the former government. Nowadays, however, the situation is almost unstable and a lot of people are still suffering from unemployment. In addition, we should not forget that population density plays an important role in this respect. It is not that easy to provide job opportunities for seventy eight million people, according to the 2006 census. Thus, this issue represents a major problem for a lot of life issues in Egypt whether economic, health, educational, or trade.

  • كاظم عيسى

    2012-4-7

    The people and villagers of Egypt used to live a good life as they used to own agricultural lands to earn their living. As of now, they lack a lot of things. The villager now comes to the city leaving the land behind him because getting water (for irrigation) is very difficult. Electricity is very hard to attain as well. The villagers are simple people who need the necessities of life, let alone those who don't have any job or work. Everybody knows that the conditions in Egypt are harder than they used to be; prices are very high. The situation is unbearable. Who can fix the situation? No one knows except God! We want from Almighty God to relieve the Egyptian people of this adversity and to have job opportunities. God willing, things will be better in Egypt than they used to be. Amen!

  • ايهاب

    2012-4-7

    We want from the government to provide job opportunities for them so they will become part of the workforce. They need to change their current situation in Egypt and get rid of the deadly unemployment. I pray to God to give them all the goodness and success. God willing, things will be better in Egypt.

  • صالح احمد

    2012-4-7

    Egyptians need many job opportunities in order to fulfill their duty the best way they can. The Egyptian government has to think this matter through. Many Egyptians are jobless; they have families and it is getting really difficult for them. The prices are very high. God only knows the situation of the poor Egyptian citizens. What we want from the current Egyptian government or the one that will rule in the future is to work as much as they can to provide all the needs of Egyptians. It has to provide job opportunities, more investment projects and employment of the workforce in order to move forward. I think the Egyptian people are very smart and creative. They can do a lot of things and the government has to support them in order to reduce the unemployment percentage. Unemployment affects the Egyptian citizens who have to work hard and find a job to be able to live. There are many poor and needy Egyptians with no one to support them or provide their needs and services.

  • اشرف هادي

    2012-4-7

    Unemployment is considered a crisis in any country. It is one of the toughest problems and the hardest obstacles. The Arab government is facing many problems nowadays. They are so many; Glorified is the world (an expression that indicates amazement). Egypt is one of the Arab countries which suffer from unemployment. As Arabs, we like serious work. The number of the population pushes us to work hard. Egypt's population is too big and the unemployment rates are very high. This represents a big deficiency in terms of the economy and other sectors.

  • Bayder

    2012-4-5

    It is time for the Egyptian people to live a better life than the way it used to be. It is time that they enjoy a life without problems. May God protect the Egyptian people from all evils! I pray to God to bless them with goodness and I pray that the prices do not increase in the markets. I pray that the Egyptian citizen will live a comfortable life, without any problems. This is what we are looking for: security, safety and stability. We hope there will be no more high prices, so that the Egyptian citizens can live a decent life. The problem of fuel in Egypt has to be solved quickly. God willing, there will be goodness.

  • فائق احمد

    2012-3-31

    The absorption of the labor markets of the Arabian Gulf of a large numbers of Egyptian workers and technicians contributed to the delay of the explosion of the problem of unemployment to the eighties and nineties, where the eighties witnessed many factors that led to the increasing problem of unemployment.

  • تحسين قادر

    2012-3-31

    The reasons for the problem of unemployment for the most part of it are due to structural reasons and the nature of the growth of the Egyptian economy, as a developing economy that is suffering from internal and external structural imbalances represented in the imbalance of payments and the state budget, in addition to the existence of a large gap between savings and investment, hence production and consumption. There is no doubt that finding out the causes of the problem of unemployment has to be linked to the pattern of the process of mainstream development. The Egyptian economy has seen volatility in more than a pattern of development, however, from the free capital economy pattern before the revolution of July ‘52, to the pattern of the socialist-oriented economy, which was accompanied by the State's obligation to absorb the bulk of employment in the government sector, both production and service. This led to the reduction of unemployment in that period, although what the Egyptian economy went through in the period from 1968 to 1973 of difficulties due to the directed and mobilized bulk of its resources for the military agreement as well as what accompanied it of degradation of the rate of domestic investment. However, the unemployment rates in that period were more about the low rates when compared to the current time (2.2% of the labor force), which may be due to the absorption by the armed forces of a large part of the labor force with increasing years of military service. With the beginning of the Egyptian economic change from the pattern of development based on the socialist economy oriented to the implementation of the so-called policy of economic openness in the second half of the seventies, it turned out that unemployment rates rose relatively. This increase remained within the acceptable limits. The unemployment rates ranged between 2.3% and 5.6% throughout this period. The increase of the size of government spending at the time made it possible to reconstruct and increase the resources of Egypt's foreign exchange, whether it was oil, remittances or proceeds of tourism in addition to the huge loans made by Egypt at the time.

  • صادق ياسين

    2012-3-31

    Estimating the volume of unemployment in Egypt is influenced by the conceptual problems and the statistical deficit in the form that emerged in the past, as the first obstacles we face when addressing the issue of unemployment is the lack of data and accuracy in a way that leads to the perception of corrective action and treatment. However, it is clear that the basic problem of unemployment in Egypt is the educated unemployment. The vast majority of the unemployed graduates from universities and high schools, and we note that the proportion of the educated in the cluster of unemployed people, is on the rise which means waste of energy and investment of human resources that have been invested in the educational process without resulting in anything in return, represented in the employment of this human capacity to become productive.

  • سدير محمد

    2012-3-31

    When the state did a transition to the free capitalist system and developed a plan for economic reform, which was based on privatization, this plan resulted in bad complications of the subject of employment. However, the state's role stopped at finding opportunities for workers and the inability of the private sector to absorb the unemployed, in addition to the early pension system which reduplicated the problem of unemployment, economic recession and the control of a class of businessmen over economic activity. The unemployment had bad sides and increased. It has become a political card to highlight when they want to pass laws and specific legislation for their interests. It was disguised unemployment, which affected the economic performance negatively and killed the desire for innovation and development even months after the revolution. However, they have legalized their situations and held them to win their hearts. The unemployment in Egypt has several factors including economic, social, political, demographic, and other factors as the population grows. The economic reform program, limited employment opportunities, increased rates of internal migration to the city, absence of an effective policy for the use and distribution of manpower, technological progress, use of mechanization, the lack of interest in scientific research, and the presence of a large gap between the needs of the labor market, mean that interdisciplinary scholastic education does not qualify graduates to work in some of the required disciplines.

  • ظاهر علي

    2012-3-31

    Unemployment is a time bomb inside every Egyptian house. It is the basis of every intellectual and moral collapse. It was one of the repercussions of the revolution of January 25 through the famous statement of life, freedom and social justice.

  • صباح احمد

    2012-3-29

    Nowadays, unemployment has become a ghost haunting every young person in Egypt. In fact, this scourge has invaded every house in Cairo. We were schooled, spent 9 years in primary and secondary education, then went to universities for 4 to 7 years. After this period, the suffering of the Egyptian youth starts. In fact, the parents spend a lot of money so that their children can achieve higher positions. However, we see that cafés teem with these young persons. It is common to go and listen to the story of a father and his son. Even if the young person gets a job, his salary will not suffice him as a bachelor. What about if he has a wife and children? His suffering will increase. Unemployment has reached 13% in Egypt. This is an alarming rate and unfortunately there are no projects to accommodate these young people. If a person asks for a grant from a bank in order to start a project, the latter will make things complicated for him by imposing many procedures. Besides, if we talk about the real cause of unemployment, we can see that the Egyptian Government has privatized many companies. Some say that privatization has many advantages. However, in Egypt, it is the opposite. Thus, the youth resort to illegal immigration and expose themselves to death in order to improve their living standards. There are many solutions that only God knows. In fact, to solve the problem of unemployment, we have to set right many paths. I really hope that God will make Egypt, the Mother of the World, achieve the best.

  • هارون شاكر

    2012-3-28

    There are some Egyptians who have high university degrees yet they could not get any work opportunities in the government. So, they work in occupations which are not suitable for their education certificates. These occupations do not commensurate with the simplest human rights as employers of the free professions drain the energy of the laborers by making them work for long hours in a harmful environment with no care or protection for the people working in the private sector. This is why; the Egyptian government has to find a solution for the educated unemployment which represents the majority in the country nowadays. Accordingly, there will be work opportunities for the unemployed citizens in all social classes.

  • موسى فريد

    2012-3-28

    Unemployment in Egypt has become a problem threatening a social catastrophe due to the increase of the unemployed individuals in the Egyptian society who are able to work. They have all the skills that qualify them to have job opportunities yet they cannot have any because there are no government jobs to absorb the huge numbers of people applying for the governmental jobs. This problem is that the government did not generate new job opportunities or send the employees who worked for more than 25 years to retirement in order to make space for new generations. They need to take part in building the country through working in new government jobs. Yet, we do not see any attempt by the Egyptian government at this time to resolve this crisis that irritates the unemployed citizens. They need money to support their families and pay for the necessary needs which they cannot do without at any time. The aggravation of the unemployment problem in the country led to the emigration of many Egyptian citizens to attain work opportunities to be able to support their families which they left at home. They are waiting impatiently for the paterfamiliases to get work and send money so that they can pay for their living needs. They have to do so even though the emigrated paterfamiliases leave their families and live at subsistence level to provide as much money as they can to send to their families.

  • باسم

    2012-3-21

    Egypt stood beside the Arabs more than any other Arab country. Among the reasons for poverty is that its people are suffering from today is the war that the country fought for the elevation of the Arabs and Muslims. They fought for Palestine, Algeria, Yemen, Iraq, and Eritrea. Egypt has never been a part of the conflict but it insists on defending righteousness everywhere. Now that the economic conditions changed because of many things which are obvious to everyone, Egypt is only able to defend the Arab issues peacefully without engaging in polemic wars that wasted our youth and threw away our wealth after Germany, Britain and other countries have borrowed money from Egypt.