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Amr Moussa: The Economic Plan

Halting the free-fall of the economy and stabilizing state finance is the priority of Amr Moussa, if he wins Egypt's coming presidential elections.
Gehad Hussein | 18.05.2012
Being Egypt's former Minister of Foreign Affairs and the former Secretary General of the Arab League, Amr Moussa is now running for presidency in the coming Egyptian elections. One of the major challenges any candidate is going to face, is fixing the Egyptian economy. Here is what Moussa has planed, if he wins and becomes the long-awaited president of Egypt:

"Egypt is on the brink of an economic crisis that we must overcome quickly while minimizing its negative impact on the poor and limited income groups. The top priority of the next president is to immediately stop the hemorrhaging of the national economy and restore economic growth that creates jobs. This is my goal and I will begin from the first day by quickly taking the following steps:

Short term:
• Restoring security and order to regain the confidence of investors and tourists.
• Restoring the faith of local, Arab and foreign investors in Egypt’s future economic policies and the country’s commitment to all signed agreements and contracts that are not tainted by corruption. In addition, guaranteeing the legal rights of investors in order to recover foreign direct investment in the bond market.
• Immediate utilization of my Arab and international connections to close the government’s huge gap in funding ($9-12 billion and growing) to provide funding for the import of basic commodities – like food and energy – and offer financing and investment packages in development projects to create jobs.

Medium and long term:
• Ending corruption and waste of state resources and raising the efficiency and effectiveness of its finances. My program is committed to work in the medium-term to reduce the budget deficit (having reached LE144 billion in 2011-2012, or about 10% of GDP) and the ratio of public debt to GDP (which reached nearly 90% at current prices), to safe levels of 334% and 60% respectively by fiscal year 2016-1017. Simultaneously, my program aims to achieve a surplus in the balance of payments to ease pressure on Egypt’s foreign reserves, which dropped from $36 billion in December 2010 to current levels of $15 billion. This would be an initial phase, followed by a return to accumulating these reserves to create a reasonable financial margin and reserves in order to be able to deal with future crises. This requires:

- Creating the necessary institutional and legal framework to manage state funds in order to arrive at efficient public spending in order to close the door on corruption as a preliminary step to uproot it. This is achieved through:

a. Merging the ministries of planning and international cooperation into the Ministry of Finance. This allows us to present a unified and realistic budget, as well as program budgets and proper planning and accountability for them while closing the door on confusion and ambiguity in decision-making and waste of state resources. This is to be achieved in parallel with developing the planning and analytical skills of ministry staff to go beyond preparing the general budget, and to include defining the priorities of public spending and supervising the implementation of budget programs and projects.

b. Establishing an Administration and Budget Office at Cabinet level responsible for developing administrative structures, putting in place performance measurement standards, the internal assessment of all ministries and state agencies, and the creation of mechanisms for administrative development and coordination.

c. Creating proper oversight of special funds at State institutions by the People’s Assembly, Ministry of Finance, Central Bank and government auditing agencies. Likewise, achieving oversight by local councils – once they are elected – over municipal special funds. The practice of non-budgetary special funds will not be uprooted except through comprehensive changes in the broader structure, which includes financial decentralization as detailed earlier, as well as comprehensive reform of the government salary structure.

d. Amending the law on the government’s general budget to allow for medium-term planning and transitioning from a “line item budget” to a “program and performance 34budget”. This will sharply raise the efficiency of public spending and returns on every pound spent by no less than 40%, according to the most conservative national and international estimates.

e. Efficient economic management of land owned by the State through the creation of a specialized ministry to assume the responsibility of land management and sale. The critical and sensitive nature of this issue demands a thorough and detailed discussion with parliament and all relevant state bodies to decide on strategic terms of how to manage this issue. This would conclude in a unified law regulating the allocation and sale of State land, including land that is allocated for sale to Egyptians abroad (40-50 thousand feddans worth $14-15 billion).

f. Efficient economic management of government assets. Extensive and detailed discussions with parliament and representative of the private sector, labor unions and other NGOs to decide on strategic terms of how to manage this critical issue.

g. Adjusting the financial relationship between the state treasury, and economic institutions and agencies in order to resolve chronic problems due to the accumulated and 35intertwined debts of these agencies. The goal being transforming these institutions into efficient economic entities aimed at increasing their revenues, paying their debts and turning them into profitable entities.

h. Separating the budget of the state’s administrative apparatus from the budget of municipal governments as part of the decentralization plan.

- Stabilizing fiscal policy through:
1. Restructuring public spending to address serious distortions observed most prominently in low economic and social returns because of weak public investment and waste. This will additionally reduce the accounting tricks in preparing the budget that mask the reality of the national economy. Restructuring would include:

a. Rationing energy subsidies and directing them to those most in need. This will cut costs, lower the budget deficit, free resources to be spent on education, healthcare and infrastructure.

b. A new structure of government salaries to provide state employees a decent standard of living while becoming effective tools in the transformation to a productive economy capable to distinction and competence, based on four criteria:

1. A unified job description upon which basic salaries will be set, which must represent the greater percentage of the employee’s or worker’s income, while shifting the salary scheme being based on experience and performance.

2. An allowance for the nature of the work that takes into consideration working conditions in different geographical regions.

3. An effective mechanism to reward distinction, competence and productivity based on scientific standards.

4. A mechanism to link wages to inflation to compensate employees and workers for real changes in the cost of living.

c. Increasing the ratio of investment in public spending with a focus on spending with high economic and social returns such as education, healthcare, infrastructure and agriculture while relying on resources that will be freed through previously detailed measures.

d. Eliminating all forms of corruption, bribery and cronyism in government spending, as previously detailed.

e. Ending all forms of waste of government funds, especially recreational spending which is at times over-indulgent.

2. Raising government revenue through:

a. Proposed tax reform to achieve social justice by adopting progressive taxation on income, expanding the tax base of investors by activating the property tax after the relevant law is amended and taxing capital gains.

b. Better management of the Suez Canal and oil resources to increase state revenues from these key resources.

c. A stable and efficient monetary policy. As my program adopts a clear vision of merging the Egyptian economy with the world economy; and there is also a pressing need to attract investment and capital from abroad, and the necessary flexibility in exchange rates. Therefore, my program aims at:

- Controlling inflation to ensure stability of prices and protecting the real wages of citizens. This is in parallel with redressing the many structural distortions of prices by combating monopolies to streamline the trading process, especially in foods and staples, thereby lowering costs and waste.

- Adopting flexible policies on foreign currency that reflect the productivity of the economy and the dynamic of supply and demand.

- Boosting the independence of the Central Bank of Egypt and its oversight of the banking sector."