Published on Al-Ahram weekly online, by , 2012.
This week a technical team from the International Monetary Fund (IMF) is in Cairo for discussions with the Egyptian government over a much debated loan request of $4.8 billion. And despite the fact that many have voiced their opposition to the deal, the Minister of Finance Momtaz Al-Said has been quoted as saying that negotiations are on track and that a deal is expected before the end of the year … //
… Critics have said that the consecutive governments have not exhausted alternatives before reverting to borrowing.
Admittedly there is a lot of waste in public spending, but it can be tackled on the long term of five years, bearing in mind that waste in the administrative system is not in expenditure but in corruption.
As for taxation, Egypt did introduce a new progressive tax of 25 per cent on income above $10 million annually after the revolution. True, in developed economies such as the US there is higher progressive taxation, but we should not look to the US because it is a huge and mature economy, which Egypt is not.
Raising taxes is only efficient up to a certain point after which it will cause revenues to drop. It leads to tax evasion and tax avoidance and discourages economic activity.
Some people look at it as a way of attaining social justice; punishing the rich. But I am not out to punish the rich if they pay their taxes. There is plenty of revenue if the tax arrears of LE60 billion are collected.
Critics say that much sought after foreign investment has not done much for Egypt.
We cannot say that investment has not done anything. Investors are very important. Employment has increased but not in tandem with the population increase because we are a young economy. Egypt’s economy should create 700,000 job opportunities. It creates only 380,000. Maybe there were investments in sectors that we did not request, but that is where is the government should play a role. Egypt should have a clear vision of which projects it needs for its development.
Our target is to employ 700,000 annually. That means a growth rate of seven per cent and an investment rate of 25 per cent. The investment rate now is 15 per cent and the savings rate is 13 per cent. What I should be looking out for is where I will get the needed rate of investment of 25 per cent.
What is your opinion on the devaluation of the Egyptian pound?
Any devaluation in a country that imports 60 per cent of its food will mean that the poor will be the hardest hit. Drastic devaluation is to be avoided at any cost. It will harm the poor, prices will increase, and so will our import bill, which accordingly will affect export prices.
Isn’t the loan too late, especially as we have been managing for the past 18 months?
We are not managing; we are drowning. Do you want unemployment to increase further? We need to get the loan immediately. If we delay the signature, conditions will be harsher. We could have done better had we taken the money earlier.
Potentially Disastrous: Business Chiefs Warn Against Catalan Secession, on Spiegel Online International, by Spiegel, Nov. 12, 2012: CEOs and bankers are warning that the Spanish region of Catalonia could wreck its economy if it decided to declare independence from Spain. But regional president Artur Mas, who favors secession and wants to hold a referendum on it, is expected to be re-elected in a vote on November 25 …;
Greek Journalist Acquitted for Blowing Tax Fraud Whistle: Widespread Corruption Linked to Private HSBC Accounts, on Dissident Voice, by Tom Burghardt, November 12, 2012: Earlier this month, Greek investigative journalist Kostas Vaxevanis was acquitted by an Athens court of charges that he breached data privacy laws with the publication of a list of tax cheats and money launderers …;