Egypt's government is looking at ways to reduce its dependence on borrowing from local banks because it is a burden on the economy, the finance minister said on Sunday.
The government, grappling with an economic slowdown and rising costs after a popular uprising, rejected an offer of IMF funds in June and has said it will rely on the local market to plug its financing needs.
"The government is considering ways to decrease reliance on internal funding because it constitutes a burden on the economy and is a temptation for banks to abandon their original role in funding the private sector," Egypt's Finance Minister Hazem El-Beblawi said at a press conference after he rang the bell to open Sunday trade on the country's stock exchange.
The IMF has said it is still willing to lend money to Egypt if Cairo changes its mind and asks for assistance. But the ruling Supreme Council of the Armed Forces is said to be imposing a low ceiling on foreign debt, reflecting worries over putting further pressure on Egypt's increasingly scant reserves. Foreign currency reserves stood at $25.01 billion in August.
Beblawi was appointed finance minister in mid-July, replacing Samir Radwan. His first declaration was a controversial one, telling press he had no intention of revising a 2011/12 budget that had been criticised for ignoring the revolution's demands for social justice.
In August he said the lack of liquidity was his "first concern" about the Egyptian economy and was "the most urgent matter to address."
Beblawi said last week that Arab governments may soon buy Egyptian treasury bills to help the government reduce the highest borrowing costs it has faced since 2008. He added that there is not enough competition to drive interest rates down.
On Sunday, Egypt's central bank sold LE6.5 billion (US$1.09 billion) in domestic treasury bills, the same amount it had offered.
He also explained the government could not continue with Egypt's costly subsidy regime that lowers prices for consumers and industry and changes were needed within two or three years.
"We want to start with things that are less harmful to the consumer," Beblawi told reporters. "People must get used to the idea that the subsidy is an exception."
The government has begun some subsidy reforms including improvements to the way cooking gas is distributed to the poor.
Beblawi also said the government would challenge rulings by the courts that have overturned deals already agreed to privatise state assets.
"We will seek all legal methods to reduce the effects of these rulings on third parties like banks and investors and will challenge them at the cassation court."
He indicated that protecting market economy does not mean protecting chaos or illegal practices, saying that the government is committed to bolstering competition and equal opportunity.
Egypt's reliance on private and foreign investments is not a luxury, he added, as it covers the funding gap that results from Egypt's low savings rate, which currently sits at 17 per cent and should increase to at least 30 per cent to boost local development.
As for government support for the stock exchange, El-Beblawi indicated that such support is done through applying proper financial and economical policies, and not through direct support from government owned -- and non-listed -- banks.