Cairo: The issuance of new Sukuk by the Egyptian government may turn out into a fail attempt citing the various reasons including the political instability and prevailing insecurity in the country. These concerns were raised by a prominent economist Galal Amin and others experts during a media briefing in Egypt’s capital, Cairo.
Amin and other economists gave their opinions on the Egyptian economy and cast their predictions for 2013 at a media roundtable held at the American Cniversity in Cairo (AUC) last week.
Amin stated, “It is difficult to predict the future,” while explaining that the economic crisis has political causes, among which he mentioned is the lack of security, a lack of trust and above all the nature and content of political discourse bringing Egypt “back to the medieval ages.”
He said that most of the factors dominating the economy are hidden and the facts are often falsified, for example the conditions the International Monetary Fund (IMF) has attached to its proposed loan in terms of subsidies and taxes, which are not yet public.
Amin then expressed his bewilderment over the sudden and hasty introduction of Sukuk, saying that the draft sukuk law is not understandable and it seems that all that matters is Al-Azhar’s decision.
“I’m afraid because [former investment minister] Mahmoud Mohey Eldin came up with the same idea and it turned out to be hoax and allowed the foreign ownership of public utilities,” said Amin wondering if the IMF has also asked for the establishment of such a tool.
Ahmed Kamaly, an Associate Professor of economics at AUC, disagreed with Amin stating, “The IMF said they didn’t impose conditions, they have conveyed the message to the government that the situation is dangerous and they have to do something about it.”
Kamaly qualified his economic forecast by saying he has assumed the political situation would remain the same in 2013.
He said, “The dollar exchange rate will keep going down and may reach EGP 7, economic performance will be weak and the growth rate will not exceed 2.5 percent.”
He added that citizens will feel the impact of the crisis and poverty would increase.
Another AUC Associate Professor, Samer Atallah, noted that unleashing free market capitalism has proved to be a failure in other countries as well as Egypt where high growth rates are not accompanied with equality or human resources development.
He said that the political economy of the current administration won’t push the economy forward because it is biased towards the rich, referring to prominent Muslim Brotherhood businessman Hassan Malek’s declarations concerning reconciliation with businessmen from the old regime.
“The train accidents and other accidents reveal the government’s biasness towards the rich,” added Atallah.
Manal Abdel Baki, an Assistant Professor of economics at AUC, said that it is easier to make long term predictions and highlight the successful experiences of emerging economies such as Turkey and South Africa who had a leader guiding the people from behind, contrasting this with Egypt which she said is divided and has no leader.
Manal stated, “In the long term I’m optimistic. The Egyptian economy has many good characteristics; young population, large consumer base and well rooted capital markets.”
Amin concluded the briefing by arguing that every time Egypt has relied on foreign aid and loans to resolve a crisis there has been a price to pay. He expected the same scenario to repeat itself in the current crisis and that the political price could be the sale of public utilities via Islamic Sukuk.