Egypt's Prime Minister has good news for "honest debtors"
Prime Minister Atef Obeid has outlined a plan to kick start the Egyptian economy that includes curbs on imports and a program to support "honest debtors." In interviews with the editors of Egyptian newspapers, Obeid said that a key objective is to control the unhealthy increase in supplies of goods, especially imports, whose growth he said was "dangerous", having doubled in under 10 years. But he did not specify how imports would be controlled. Obeid attributed the current market recession to money frozen in unsold goods and unused production capacity.
"Most of these were funded through borrowing," said Obeid, adding that borrowers failed to sell their excess goods or reactivate their unused capacities and so they fell back on repaying their obligations to banks.
Over the past year Egypt has suffered an intermittent pound liquidity crisis, as well as foreign exchange shortages, which have been accompanied in recent months by an apparent slowdown in economic activity.
Corporate results have fallen short of expectations, the stock market has recently dipped to lows not seen for nearly four years, and the prices of core commodities like cement and steel have been depressed.
Obeid said another objective of the plan is to support "honest investors" who are falling behind on repaying their loans, so as to help pull the market out of its current recession.
Economic experts believe Obeid's remarks indicate that the banks would give some debtors more time to repay their loans, with government help. Egypt's four biggest state banks still dominate the banking sector. Analysts say some have problems with bad debts and that may be one factor delaying bank privatization. "The government will continue to support honest debtors during their default periods," Obeid said.
He added that Egypt's imports increased to LE54 billion ($15.2 billion) in 1999, up from LE27 billion in 1991 and LE44 billion in 1997. Obeid said Egypt's annual trade deficit over the last three years has stood at $11 billion. Obeid said part of these imports competed with domestic production, which led to its stagnation.
"This increase has pressured the foreign exchange market at the time when it was suffering from a shortage of resources due to a decline in tourism resources in 1997 and then petroleum resources in 1997, 1998 and 1999," said Obeid.
Oil and tourism are among Egypt's key foreign currency earners, along with the Suez Canal and remittances from Egyptians working abroad.
The government last year moved to control imports, saying letters of credit for imports had to be 100 percent covered in cash. Obeid said the government would continue its privatization program, offering stakes in firms in the telecommunications, petroleum, and electricity sectors to help eliminate a dollar shortage and improve production quality.
Obeid said the government would repay LE4 billion owed to contractors and suppliers payable by 2000. This is part of a program to repay its domestic debt that started in May in a bid to revive the economy. He said the government had already paid LE8.2 billion of debts, which fell due in 1999. –(Albawaba-MEBG)
© 2000 Mena Report (www.menareport.com)