Egypt’s long-awaited cabinet reshuffle, which comes against a backdrop record inflation, a depreciating currency, escalating public debt, growing budget deficits and worrying geopolitical tensions, saw the cabinet’s economic team completely overhauled as new faces were ushered in and the structure of some ministries changed.
The war in Gaza and disruptions to maritime traffic in the Red Sea have resulted in the decline of Suez Canal revenues, one of Egypt’s main hard currency streams, and negatively impacted tourism and FDI inflows, N Gage Group CEO Sherif Fahmy told Al-Ahram Weekly.
Ahmed Kouchok, vice minister of finance for fiscal policies and institutional reform, becomes the new minister of finance, replacing Mohamed Maait who held the post for six years. Kouchok is no stranger to the ministry. He has held several economic posts since 2007 and played a major role in the government’s negotiations with the International Monetary Fund (IMF).
News of Kouchok’s appointment was welcomed by observers. Kouchok is familiar with the fiscal policy decision-making process because he had been an aide to Maait since 2016. He was also on the board of the Central Bank of Egypt, giving him extensive monetary policy experience. As a former World Bank economist, he also has a solid background in dealing with international financial institutions.
While Kouchok’s promotion from within the ministry suggests the current policy will continue, some commentators argue that a more conservative approach to foreign and domestic borrowing is in the offing.
Egypt is facing skyrocketing debt and debt service levels and a vulnerable debt profile, Sarah El-Khishin, associate professor of economics at the British University in Egypt (BUE), told the Weekly. According to the IMF, Egypt’s Public debt currently stands at 96 per cent of GDP and its debt service reached an all-time high of 41 per cent of GDP.
Escalating public debt and budget deficits demand fiscal discipline and investments that will enhance revenue streams and reduce reliance on external borrowing, says Fahmy.
Facilitating genuine private sector participation in economic growth, and by extension the generation of tax revenue, will be pivotal for sustained development and improving the external position, argues El-Khishin. To which end the reshuffle resurrects the ministry of investment, a department shelved 10 years ago, under the new guise of Ministry of Investment and Trade.
“The return of the Investment Ministry is very promising and in line with the government’s efforts to attract FDIs,” says Maha Rashied, economist at Dcode Economic and Financial Consulting.
According to Rashied, merging investment and international trade makes sense since it will allow direct investments to be channelled towards increasing exports and improving the trade balance and current account deficit.
Hassan Al-Khateeb, the new minister of investment, has 35 years of experience working with investment banks in Egypt, North Africa, Turkey, and central and eastern Europe. He has served on the boards of companies in the insurance, industry, pharmaceutical, tourism, real estate, oil and gas, telecommunication and textiles industries, and is a non-executive board member of the Central Bank of Egypt.
Fast-tracking investments, regardless of whether they are new or old, local or foreign, will incentivise investors and help guarantee the longevity and sustainability of investments, said Mariam Diab, an economist at N Gage.
The reshuffle also sees the Ministry of Planning merge with the Ministry of International Cooperation. The new portfolio will be headed by Rania Al-Mashat who has been minister of international cooperation since 2019.
“The ministries of investment and international cooperation play a crucial role in steering policy to enhance private-sector engagement in the economy,” says El-Khishin, and coordination between them could be key to pushing forward finance for sustainable development.
The Ministry of Transport is merging with the Ministry of Industry, with existing Minister of Transport Kamel Al-Wazir taking the helm of the combined portfolio. Al-Wazir has overseen a massive expansion of Egypt’s transport network over the last five years and his performance in the post is said to have impressed President Abdel-Fattah Al-Sisi.
Taking over as minister of supply is Sherif Farouk, chair of Egypt Post and the former CEO of Nasser Social Bank. The role is central to containing inflation: the ministry is responsible for food and bread subsidies and oversees the supply of commodities both from the local and international markets. Over the last two years, as inflation soared, a thriving black market for staples such as sugar, rice, and cooking oils has developed and now needs to be reined in.
The recent 300 per cent increase in the price of subsidised bread, part of the government’s plan to move away from a goods- to a cash-subsidy system, was controversial. But Farouk has experience in implementing structural change. He oversaw the revamping of Egypt Post and reformed the pension payments system, and his stint at Nasser Social Bank, established in 1971 with a mandate to serve those on low incomes, gave him firsthand expertise of the problems facing the least privileged.
Ensuring sufficient supplies of gas to generate electricity for the national grid is a major challenge facing the new cabinet. Shortages have resulted in daily power cuts lasting from two to four hours, resulting in factories in energy-intensive industries halting production lines and a government decision ordering shops to close by 10pm.
Now the ministries of petroleum and electricity — those directly dealing with the power cuts — have new heads. Karim Badawi takes over the petroleum portfolio. Having worked in the oil business for 27 years, latterly as MENA director of Schlumberger, the American oilfield services company, he is well placed to negotiate with international partners over the management of Egypt’s oil and gas fields. Arrears to partners, a side effect of Egypt’s foreign currency crunch, pushed them to slow down both downstream and upstream activities, contributing to the recent shortage of gas.
The Electricity Ministry will be headed by Mahmoud Esmat, the public business sector minister in the outgoing cabinet. Esmat studied power engineering and has worked in multiple fields, including oil and gas, petrochemicals, airport management, and maritime transport in Egypt, Qatar, and Germany.
“While the cabinet changes are significant, what matters most is that the new cabinet learns from past mistakes. Changing the faces around the table will not help much if the model remains the same,” says El-Khishin.
“There needs to be a substantive shift in defined roles and committed changes to the system.”
* A version of this article appears in print in the 4 July, 2024 edition of Al-Ahram Weekly
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