Egypt: Military warning

Three months before the scheduled handover of power, members of the Supreme Council of the Armed Forces sounded warning bells on the economy – Published on Al-Ahram weekly online, by , 29 March – 4 April 2012.

At best, Egypt’s growth rate will not surpass two per cent over the course of this and next fiscal year, Lieutenant Mahmoud Nasr, assistant minister of defence for financial affairs, told reporters and observers this week, in a meeting attended by Niveen Wahish. “All we can hope for now is to ensure food and drink and security,” said Nasr. He does not foresee an economic pick-up before six months to a year have gone by from the election of a president. 

“What we are witnessing today is a result of the fact that the right decision was not taken at the proper time,” he said. Nasr also criticised what he termed as government mismanagement. He said the Ministry of Planning is the weakest of all ministries. In addition, the ministers in charge of the economic portfolio have failed to specify the priorities for expenditure.

Nasr went through the government budget highlighting that the current targeted deficit of LE144 billion is a factor of increased debt service, coupled with lower tax revenues as a result of the economic slowdown. He said the deficit will be contained within that figure, also due to some LE14 billion in budget savings.

Nasr showed that more than a quarter of the budget has been specified for paying debt instalments and debt service. Together, these two items consume LE206 billion, which constitutes a big chunk of Egypt’s budget of LE594 billion for the current fiscal year … //

… If the total military expenditure were to be borne by the government, it would be on account of other areas. Nasr noted that the funds from the military’s economic activity not only enable it to sustain itself and to maintain a six-month strategic stock of basic commodities in case of crisis, but also enables it to assist the government.

In the past year the military has supported the foreign reserves fund with $1 billion. This, Nasr said, is well-earned money resulting from helping clearing mines in Kuwait and doing some peacekeeping activities with the United Nations. Further, he said the army has given the government around LE12 billion in loans that went to various projects, ranging from rebuilding police stations after the revolution, to building roads, and disbursing funds to cash-strapped governorates.

“Securing the parliamentary elections alone cost some LE180 million,” Nasr said. Moreover, he said that since the revolution, Egyptians have not felt any shortages in basic commodities, thanks to the role played by the army.

Nasr added that the military has been able to create economic activity in many remote parts of Egypt, where no one else has been willing to go. This work has been aimed at paving the road and creating the infrastructure for others to follow. Among those remote areas is Al-Owaynat agricultural project in the Western Desert. That work has been aimed at achieving food security.

Given the effort behind the military’s projects, Nasr stressed that handing military projects to a civilian government is not acceptable as long as they serve the country, pay taxes and are supervised by the Central Auditing Agency.

Nasr refused claims that the current shortcomings of the economy are the responsibility of the army. “There is a prevalence of responsibility because this is a compelling situation.” He added that the Supreme Council of the Armed Forces’ responsibility now is to hand over the country. Notwithstanding, he said that the military, as the ultimate source of patriotism, would not let the country sink. (full text).

Links:

The French election: An inconvenient truth – The French have had a security wake-up call. But when it comes to the dangers facing their economy, they are still dozing, on The Economist, March 31, 2012;

Schumpeter – How to make a megaflop: Three simple rules to ensure humiliating failure, on The Economist, March 31, 2012:

  • First: slaughter a sacred cow …
  • Second: mix oil and water …
  • Third: produce a genuinely awful product …
  • But: Fear of flopping – Still, the surest way to guarantee failure in the long term is to be so paralysed by the fear of it that you don’t try anything new …

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