With the enthusiasm of TV show viewers keeping up with the latest episode, people were busy last week following the decision of the governor of the Central Bank of Egypt (CBE) Tarek Amer to resign and the appointment of Hassan Abdallah as acting governor. In reality, news of this sudden change overshadowed other important developments, including the cabinet reshuffle that preceded it only two days before.
It does not surprise me that the appointment of the CBE governor attracts such public attention, especially in the midst of a global economic crisis, turbulent markets, a shortage of hard currency, and rising prices.
However, what drew my attention was the media’s handling of this change, which portrayed it as if the economic crisis had thus been overcome, and the government had finally managed to surmount its biggest problems. This is a misrepresentation that cannot be beneficial to the country.
According to the constitution and the law, the CBE is independent of the government, meaning that it is solely responsible for supervising banks and the payment system and for setting monetary and credit policies. But this does not mean that it is independent of the state or that it operates in a vacuum. In fact, there are overarching state economic policies, general directions, and continuous coordination between the CBE and the government, notwithstanding the differences in management styles and executive work.
On the other hand, the CBE is directly responsible for monetary and credit policies, but it is not responsible for the overall economic performance. It is therefore unfair to put the blame on it for the absence of policies stimulating industrialisation and production, the crowding out by the state of the private sector, or the priorities for public spending, all of which are government duties. It is true that the CBE’s exchange rate policy and management of import restrictions were the subject of widespread criticism locally and internationally in recent months. In fact I have myself expressed my reservations thereon. But it is important not to be carried away by the belief that our current economic crisis is caused by CBE policies and decisions alone.
In line with the same logic, the suggestion that the current economic crisis will end as soon as a new CBE governor takes over is a severe exaggeration, which in addition puts the new governor under undue pressure. Nonetheless, I am optimistic about him, confident of his professional capabilities and extensive experience, and certain that he will rebuild bridges of trust and cooperation with the investment community. In addition, he has three difficult and urgent tasks: successfully completing the negotiations with the International Monetary Fund, managing the troubled exchange market, and restoring our ability to import especially industrial and production needs. But his success in all of the foregoing will depend not only on his efficiency and expertise, but also on the parallel progress required of the government in terms of encouraging investment, restoring the confidence of the private sector and stimulating production and industrialisation.
What matters more than changing the person of the governor is for there to be clarity and reform of the state’s economic path, especially with respect to the government’s management of investment, industrialisation, and public spending.
I end these remarks with my sincere wishes for the new governor to succeed on his difficult mission, my gratitude to the former governor for shouldering the responsibility during difficult years, and my prayers for our economy to transcend the current crisis.
This article also appears in today’s edition of the
daily Al-Masry Al-Youm.
*A version of this article appears in print in the 25 August, 2022 edition of Al-Ahram Weekly.
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