Floating the Egyptian pound is not enough to solve Egypt’s economic woes, and curbing imports is a positive "short-term step," said investment mogul Mohamed El-Erian at a Cairo event Wednesday.

"You cannot design an exchange rate policy in isolation of what else you're going to do, and if you try, you will get it wrong," said the chief economic adviser at European financial and insurance services giant Allianz, at an event organised by the American Chamber of Commerce in Egypt.

Economists and business people, as well as international financial institutions, have been calling for the Central Bank of Egypt (CBE), which has defended the pound, to adopt a more flexible exchange rate regime.

The Central Bank does not plan on floating the pound until forex reserves, currently at $16.5 billion, reach at least $25 billion, said CBE Governor Tarek Amer in a televised interview Sunday. 

Instead, Egypt needs "a comprehensive policy response" to the economic challenges it faces after years of turmoil, and it must stay on track with reform, said El-Erian, who sits on the CBE's coordinating council.

"I look at this not as an engineering problem. People are aware of what needs to be done. It's just an ability to implement it,” said the internationally renowned economist, calling for a partnership between the private and public sectors.

El-Erian, who spent 15 years with the International Monetary Fund, defended recent policies by Egypt’s government designed to curb imports in the face of a foreign currency crunch.

“Countries take short-term steps as a means to a much better longer term end,” said El-Erian in response to a question. “I don’t believe they are an end in themselves.”

In the long term, Egypt must "unleash [its] productive powers,” through education, structural reform, and commitment to a vision Egyptians can rally behind. 

The most populous Arab country, Egypt boasts "a huge domestic market that's not fully exploited yet," a large, educated and cheap labour force, and an "incredible geographic location,” El-Erian stressed.

“Things are being done, [in terms of] electricity, roads. But it’s also about the education system,” he said, calling on private companies to participate in “re-tooling” the country’s labour force for today's realities.

Egypt also needs to address deficits in its balance of payments and fiscal account, he warned, or else inflation, already in double digits, will rise.

"The final issue is reinforcing the vision of where we’re going ... not in terms of economic growth and the inflation rate — that doesn’t mean very much to people — but in terms of their basic needs: housing, health, education.”

As many as 20 million Egyptians, almost a quarter, live in informal housing, according to the World Bank as of 2015. Government spending on health and education combined accounted for less than six percent of GDP in the last fiscal year.

The investment mogul, whose latest book, The Only Game In Town: Central Banks, Instability and Avoiding the Next Collapse, was hailed by Time as “the one economic book you must read now,” expects oil prices to rebound "in 12 to 18 months, when the market regains its footing, but it certainly is not going back to $100 a barrel.”

According to El-Erian, OPEC’s decision last year to let prices drop in return for maintaining market share “pulled the rug” from underneath oil traders, sparking a period of instability in the market.

El-Erian argues that there are signs that the “new normal” — sluggish growth following the 2008 financial crisis, coupled with the belief that central banks can control financial stability — is no longer applicable.

He cites daily movements of 200 points in the Dow Jones Industrial Average, oil prices fluctuating by three to six percent on a daily basis, and the fact that “30 percent of global government debt is now at negative interest rates,” among other signs of a paradigm shift.

"What this is telling you is that there are incredible tensions in the Western economies, and these tensions are expressing themselves through very unusual economic, financial, political, and social developments,” says El-Erian, adding, “And it will get worse."

The former CEO of PIMCO, one of the world’s largest bond investors, advocates “optionality, agility, and resilience” to weather what will come next.