Members of parliament projected that economic aspects would be foregrounded in the cabinet’s programme, to be proposed to the parliament on Sunday, in light of the crises Egypt is currently going through.
“The economic crises Egypt has been going through over the past two months are evident to every Egyptian citizen,” said MP Passant Fahmy. She added that the mounting lack of dollar availability has led to a major increase of prices of basic goods.
Fahmy believes the government will reveal its financial and monetary strategy to address the current economic challenges, in the programme it is proposing to parliament on Sunday.
The dollar price in the informal market hit EGP 9.80 on Saturday, whereas its official price in the banking system is still fixed at EGP 8.88.
On 14 March, the Central Bank of Egypt (CBE) devalued the pound by 112 piasters against the dollar, the value of which recorded EGP 8.95 at banks. The dollar slightly depreciated by seven piasters on 16 March, recording EGP 8.88.
“The government must work on mitigating the negative effects of the decision to devalue the pound,” said MP Amr El-Gohary.
He said prices increased immediately after the devaluation of the pound last week. He further noted that this 25% increase in prices is a threat to employees’ wages, especially low-income individuals.
The government has failed to alleviate the economic crises over the past month, El-Gohary added, noting that the problems eventually forced the government to amend a number of ministerial portfolios.
Prime Minister Sherif Ismail reshuffled the cabinet Wednesday, replacing nine ministers and introducing one new ministry. The replaced ministers included the ministers of tourism, finance, agriculture, irrigation, and antiquities.
The government hopes to minimise criticisms directed towards it by reshuffling the ministers, according to another MP.
“The criticisms were severe, especially towards the ministries of finance, investment, tourism and irrigation,” the member said.
He added that the criticisms towards the Ministry of Finance arose due to the aggravation of the budget deficit in fiscal year (FY) 2014/2015, which exceeded 10.5%. Meanwhile, the criticism towards the Ministry of Investment was due to the lack of foreign investments and inbound tourism to Egypt due to the suspension of foreign flights to Egypt.
The Ministry of Irrigation was subject to censure due to its performance on the issue of the Grand Ethiopian Renaissance Dam.
The government hopes to reduce the budget deficit for FY 2016/2017 to 9.9%, equal to EGP 314bn, with expenses of more than EGP 940bn.
Further, MP Hussein Eissa said he hopes that the deficit will decline to 8% in FY 2016/2017 instead of 9.9%. He also hopes new methods will be adopted to finance infrastructure projects, either through revenue bonds, or entering banks as partners in these projects and providing them with a percentage of the revenues.
Revenue bonds allow the state to propose infrastructure projects and finance them by offering bonds to citizens in exchange for interest from the revenues of these projects.
The parliament must look into the cabinet programme within 30 days, according to Minister of Planning Ashraf El-Araby. He added that the parliament will form its permanent committees within a week in order to study the programme.
According to El-Araby, the industry, energy, and agriculture committees will play a major role in reviewing the programme. He expects heated discussions with regards to the state’s strategy in terms of the pound’s exchange value and foreign investments.
Moreover, MP Mohamed Farag has made a request to parliament speaker Ali Abdul Aaal demanding that CBE Governor Tarek Amer introduce the CBE’s strategy for the pound exchange value.
“The CBE must eliminate the discrepancy between the exchange rate in the official banking system, and that in the informal market,” he said.
Economists believe that the pound is currently overvalued, thereby weakening the flow of FDI in the upcoming period. This means that CBE’s strategy alone will not solve this issue, he said.
“There must be a fiscal policy that suits the monetary policy set by the CBE. This means the Ministries of Finance, Investment, Industry, and Supply will have a major role during the upcoming period,” he added.
The Suez Canal and Egyptians’ remittances from abroad, in addition to tourism, will be the most important sources of hard foreign reserves.
Tourism, which accounts for one fifth of foreign reserves, majorly plummeted after the downing of the Russian plane in October 2015. Tourism income declined to $6.1bn in 2015 compared to $7.3bn in 2014.
Elhamy El-Zayat, head of the Egyptian Tourism Federation, said the restoration of tourism will relieve pressure on the pound’s exchange value.