For hundreds of years, and up to the early years of this millennium, the phrase “he’s a millionaire” implied “he” happens to be a very wealthy person; “he’s made of money,” so to speak. Today, the phrase no longer reflects the same level of affluence.
Many can be considered millionaires in today’s Egypt. If you own an apartment that you wish to sell, one you bought for EGP 10,000 in the 1970s, you would most likely sell it for EGP 1 million today. If you own a handful of agricultural feddans, you are also a millionaire. If you are renting an apartment in a two-storey building, you might vacate it for a million or two so that the landlord can build a skyscraper.
Today, one million is a mere drop in the bucket in the large scheme of matters.
The same goes for countries. Projects in the millions used to be grand ones. We gasped if a project was worth EGP 100,000 million. Chances are now that we may not give such projects the time of day. Only billion-pound projects are worth noticing. And in Egypt, many a hefty sum is being spent on pricey, ambitious projects.
The reclamation of 1.5 million feddans in the Western Desert, including the Farafra Project at a cost of EGP 6 billion is dwarfed next to the Suez Canal Corridor Project, which is estimated to cost EGP 150 billion. Housing projects will cost approximately EGP 40 billion.
Add to all this the new highway system currently being constructed, the development of Sinai, and the energy projects, be it wind, gas or nuclear power. These are only a few of the many projects. In the meantime, the debt accrued to complete such projects swells, the interest snowballing.
In addition to these mega projects, the upkeep for a population of 90 million is horrendous, though the necessary improvements timely and dire; raising the minimum wage, providing pensions for those in need and a yearly 10 percent increase to all pensions, maintaining the salaries of seven million government workers and subsidising power and bread. That is in addition to buying Rafale fighter jets and Mistral warships and building a new capital.
The cost of implementing these projects and acting on the pressing improvements are pretty staggering.
Two schools of thought exist as far as whether countries should spend, or better yet, whether they should borrow. One school recommends conserving and not borrowing. Germany and Britain have cost-cutting stances. Defence budgets in Britain are at a record low. Britain’s Chancellor George Osborne, about to deliver the 2016 budget, warns of further spending cuts with the thought that Britain must live within its means.
As for Germany, and according to an article in Bloomberg, there is no such thing as guilt-free borrowing, and Merkel confirms this strategy, remaining reluctant to borrow.
That is in addition to crisis-stricken countries, such as Ireland, Greece and Spain, which are taking challenging steps to reduce their deficits and debt liabilities by resorting to sharp austerity measures.
The second school is in favour of spending. Canada is investing in growth by accruing debt, as detailed in Prime Minister Justin Trudeau’s election platform.
Canada’s 2016 budget set $120 billion for the development of new and existing infrastructure over 10 years. Today, with the Canadian dollar and oil prices taking a nose dive, the Canadian government is going deeper into debt than originally anticipated.
Japan and the US are for the latter approach as well, with debts in the trillions. In fact, figures tell us that many a country is over its head in debt. Japan is in debt at 226 percent of its gross domestic product (GDP); Greece at 175 percent; Italy at 133 percent; Portugal at 128 percent; and Lebanon at 120 percent.
Egypt’s debt was at 92 percent of its GDP before its external debt increased to $53.4 billion in the first quarter of 2016 from $47.7 billion in the fourth quarter of 2015, bringing the debt closer to 100 percent.
Egypt’s domestic debt is over EGP 2 trillion as the government relies on domestic borrowing to plug deficits.
So, which is the way to go? Should a country spend or refrain from doing so to boost a sagging economy? It is indeed a dilemma.
In Egypt’s case, sources of hard currency have dwindled in the last five years, be it declining tourism or transfers from abroad. Egypt could have waited for improvements to occur gradually, assistance and grants to arrive sporadically, developments to happen on their own; better yet, wait for God’s generous hand to bestow change. None of these options can pull Egypt out of its troubles fast enough.
In the 1940s, Prime Minister Ismael Sedky Pasha opted to demolish the seawall along the corniche in Alexandria only to rebuild it for the sole purpose of providing work and reviving the shaky economy.
We would not be going down the wrong route if we follow Sedky Pasha’s example, though we would not go as far as demolishing worthwhile infrastructure, much of which needs overhauling and renovating.
Spending, even if unpopular, creates work, revives economies and improves the livelihood of the poverty-stricken. The key is productivity, and without productivity, which leads to growth, economies will remain sluggish.
In Egypt we chose to go with spending while accruing debt to revive the economy and get Egyptians back to work. However, this debt should remain our focus and in front of our eyes. It is not free money, and the day will come when we will have to repay it.
We must remain alert to the ramification of borrowing and avoid spending haphazardly on futile projects or on subsidies. We must spend only on worthwhile projects, ones which will bring development and growth. We must utilise loans to the best of our ability.
I suggest a debt metre similar to the population growth metre atop the Central Agency for Public Mobilisation and Statistics building in Cairo to keep us focused. Maybe such a metre would maintain awareness and vigilance.
We need to remember that it is our children and grandchildren who will be paying for our spending.
The writer is author of Cairo Rewind: The First Two Years of Egypt's Revolution.