New premier to revitalise Egypt’s government



 

 

 

By Mark Huband in Cairo

Financial Times, 8 October 1999

Egypt’s new prime minister plans to revitalise government by giving more power to individual ministers to implement their policies and accelerate economic reform.

Announcement of a new cabinet is expected tomorrow, four days after the appointment of Atef Ebeid as premier. In his first interview since his appointment, Mr Ebeid said decision-making and implementation of policies were the main areas in need of reform. “There’s a great need to give ministers a policy shaping role… The prime minister should co-ordinate in partnership with the ministries, rather than act as the boss,” Mr Ebeid said.

Such a change is a significant departure from the highly centralised and slow decision-making process that dominated the administration of Mr Ebeid’s predecessor, Kamal el-Ganzouri.

Mr Ebeid identified particular areas in which ministers will make their own policy decisions, with said there would be fewer less opportunities for critical ministers to use cabinet meetings to undermine ministers with whom they disagree.

“The Ministry of Economy will decide on whether a bank and insurance company will be sold, and will decide what the next measures will be to deal with the issue of foreign currency shortages,” Mr Ebeid said.

Continued government control of 60 per cent of the banking sector, as well as state ownership of the four largest insurance companies are regarded by financiers as hurdles to the growth of the financial services sector. Foreign currency shortages, caused by the Central Bank of Egypt’s refusal to use reserves to meet growing demand from importers, has deterred foreign investors and seriously harmed the banking sector, according to foreign and local bankers.

Despite reserves falling $2bn to $16.5bn this year, the CBE, whose governor is appointed by the president, has resisted pressure to release more funds, creating the most serious crisis for commercial banks since Egypt launched its economic reforms in 1991.

Egypt’s policy of using reserves to maintain a strict currency peg to the US dollar has become increasingly difficult to sustain as the current account deficit has grown. The deficit has been accompanied by an outflow in portfolio investment, leading to an 11 per cent fall in the value of stock market trade in 1998-99. Egypt’s trade deficit is also expected to increase by $ 1bn in 1999-2000 to $ 13.5bn, according to the IMF.

Redressing the trade imbalance and attracting portfolio investment to the cheap Egyptian market are now at the heart of government policy. Privatisation continues to be the key to attracting more foreign investment. Mr Ebeid committed the government to selling 20 per cent stakes in the two largest state-owned utilities, Egypt Telecom and the Cairo Electric Company, this year.

 

©Financial Times