Recent economic decisions by the Government and the Central Bank have resulted in the economic landscape substantially shifting in different directions
On the one hand, the new measures offer a better opportunity to attract foreign investment, regain tourism, and boost exports, and they bring dollar transactions back into the official banking sector. But on the other hand they have prompted a decline in the value of the pound, a spike in fuel prices (and with it, the cost of transport and agricultural, industrial, and service production), and an increase in food prices.
Every household in Egypt is now scrambling to deal with this new reality. It’s a complex situation, whereby analysts anticipate macroeconomic indicators to gradually improve, but the inflationary impact on the majority of Egyptians is expected to be brutal, especially given predictions of more price increases and with the lack of adequate compensatory policies in place.
What I want to address today, however, is the position of opposition political forces regarding those economic policies, and specifically those parties and currents championing the interests of the middle and poor classes. They have criticised the recent measures, arguing they have and will lead to the further impoverishment of the Egyptian people.
With all due respect to them and their principled political commitments, I fear they’re pointing the finger in the wrong direction and offering unrealistic solutions. I’ll take three concrete issues to demonstrate my point.
The first is the need to distinguish the causes of the country’s economic crisis from its outcomes. Floating the pound, increasing fuel prices, implementing a VAT—none of these led to the impoverishment of Egyptians. It is specific economic policies adopted by during the last two years that have exacerbated the crisis and inevitably led to these measures.
These include the mismanagement of investment in the months following the 2015 Sharm al-Sheikh conference, a focus on unjustifiably costly megaprojects, state competition with the private sector in areas that require no state intervention, a failure to confront institutional corruption, the lack of a comprehensive social policy going beyond pensions and cash subsidies from the Ministry of Social Solidarity, the blocking of all channels for political and parliamentary participation in economic decision making, and the ongoing political bottleneck.
These are the causes of the crisis, and we need to address them instead of focusing exclusively on their consequences.
The second area of concern is tax policy. Globally, there are various schools of thought, from those that call for lower taxes, less government spending, and less state interference in the economy, to those that demand higher taxes to provide the resources needed for economic development and social justice.
While I’m partial to the second, each school has its own internally consistent logic. But what I object to is the opposition adopting an internally incoherent stance: it advocates more public spending in vital fields like education, health, sanitation, and public transportation, but opposes every new tax to fund them, regardless of how fair and balanced.
This is true of the property tax, which is paltry by international standards; the VAT, which regardless of its many implementation problems is necessary in principle; the extension of the tax umbrella to informal activities; and the increase on notary fees and other fees and taxes that can provide the resources necessary to protect the poor.
Anyone who wants more public spending, more social protection, and more human development must accept more comprehensive, fair taxation.
The third issue relates to investment. No doubt we’re all against corruption and cronyism in investment, against benefits and exemptions granted solely to major corporations, against the neglect of Upper Egypt and peripheral governorates, against investment that squanders natural resources or threatens public health, and against the exploitation of labor.
This stance should be the basis for a balanced investment policy geared to development.
But those who believe that private investment plays an important role in boosting production and employment shouldn’t advocate impractical ideas like state intervention in defining fields of investment, limits on profit margins, and bans on the lawful expatriation of profits abroad.
If we agree on the importance of investment, we need to provide suitable conditions for growth, activity, and competition. And this need not necessarily entail corruption or a bias to the rich.
These are some areas that require reconsideration by Egyptian opposition forces if they want to offer practical alternatives to the current economic course.
My criticism isn’t motivated by malice. On the contrary, it is driven b a concern for the credibility of opposition voices and a critique the country needs to regain its footing.
The opposition can’t gain such credibility in economic matters unless it moves beyond its current protest stance and acts as if it’s ready to compete for power and assume responsibility, no matter how inhospitable the current political situation.
It must rely on sound facts and figures, recognize the scarcity of available national resources, and show a readiness to make difficult choices as a part of an internally consistent, comprehensive economic policy.
Yes, the state needs to review the economic policies that brought us to this precipice. But Egypt equally needs a strong, organised, credible opposition that can revise its economic stance and reassess the solutions it proposes. The absence of this alternative voice is a loss for us all.
*The writer holds a PhD in financial law from the London School of Economics. He is former deputy prime minister, former chairman of the Egyptian Financial Supervisory Authority and former chairman of the General Authority for Investment.
A version of this article was published in Arabic in El-Shorouq newspaper on Monday, 14 November.