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.
"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."
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.