Egypt economy chiefs vow to ease shortages

Updated 19 July 2013

Egypt economy chiefs vow to ease shortages

CAIRO: Economic ministers in Egypt’s new government are pledging to ease shortages and make it easier for factories to operate, while signaling that any major reforms to repair the state’s crumbling finances will be undertaken cautiously.
The cabinet, formed this week, has not yet issued a detailed statement on its plans for the economy, but public comments by ministers suggest they will focus first on reducing public discontent and removing barriers to industrial production.
Major structural reforms of economic policy, such as changes to Egypt’s wasteful and expensive system of fuel and food subsidies, will be discussed, but early action is unlikely.
“My first priority is to make sure that supplies of basic commodities like wheat are within the safe limits,” state-owned Al-Ahram newspaper quoted Mohamed Abu Shadi, a police general who was appointed supply minister, as saying.
Foreign exchange shortages under the government of President Muhammad Mursi, ousted this month by the army, reduced Egypt’s wheat imports and its stocks of the grain have fallen.
Shadi said he aimed for a public discussion about Egypt’s bread subsidies, a debate that would include producers, distributors and consumers. But he did not specify when the talks would end and when decisions on any reforms might be made.
State news agency MENA quoted him as saying no action affecting citizens would be taken before a public opinion poll had been conducted to find out their needs and demands.
The caution with which Egypt’s interim cabinet is approaching economic policy stems from the political pressures it will face in a tense transition back to civilian rule.
After a year of Mursi’s administration, Egypt’s fiscal position is desperate; in recent months government revenue has covered barely half of all expenditure, leaving borrowing and aid to make up the rest.
But a major task of the interim government is to steer Egypt to parliamentary elections expected in about six months. The transition could be delayed by any radical reforms of the budget system that hurt living standards and brought protesters back onto the streets.
Also, this month’s pledges of $ 12 billion of economic aid from Saudi Arabia, the UAE and Kuwait are likely to ease immediate pressure on the budget, allowing the government to continue spending in coming months.
So rather than pushing bold policy changes in the near term, the new cabinet looks likely to focus on trying to resolve some of the logjams, logistical breakdowns and inefficiencies that damaged the economy under Mursi, such as the fuel shortages that caused public outrage.
Sherif Ismail, the new oil minister, told Al-Ahram this week that he would focus on meeting domestic demand for petroleum products by increasing natural gas production and resuming imports of diesel and low-quality mazut fuel.
Interim trade and industry minister Mounir Fakhry Abdel Nour said his priority would be resuming halted industrial projects, providing power to industry, and bolstering security in industrial areas.
In an apparent effort to secure working class support for the government, manpower minister Kamal Abu-Eita, a former union leader, has said he plans to strengthen legal protection for unions and improve minimum wage policy.
He did not give details.
The cabinet as a whole has not yet said clearly whether it will resume talks with the International Monetary Fund on a $4.8 billion loan, which would come attached to economic reform commitments that the government might find politically risky.
Planning minister Ashraf Al-Arabi said this week that now was not the right time to restart negotiations with the IMF because the aid from the Gulf would carry Egypt through the transitional period.
The new finance minister, Ahmed Galal, said in a statement earlier that an IMF loan was “part of the solution,” but he did not specify whether the interim government would aim to sign an IMF deal during its tenure, or leave that to a post-election administration.
It is possible that the interim government, which is packed with economic technocrats, will hold talks with the IMF and make minor reforms, laying the groundwork for bigger changes.
Final decisions and implementation of them, as well as the signing of any IMF deal, could be left to the next government, which will be able to claim a democratic mandate.
“We need time to read and study the issues and files on the ground, to come up with sound and well thought-out decisions that will pave the way and build the future for governments to come,” Galal said in his statement.
He said it was important to manage public spending and bring the budget deficit under control. But he also said Egypt needed to avoid deflationary policies as they could hurt the labor market — a hint that quick, sharp public spending cuts would not be made.
An army official said the army understood the importance of fixing the economy and would give the cabinet a lot of leeway to do so.
“We are leaving it to the interim government to decide on polices, and they will get our backing on whatever they agree to do, including if they want to move forward with the IMF deal.”


S&P 500 inches closer to record high

Updated 12 August 2020

S&P 500 inches closer to record high

  • US stock market index returns to levels last seen before the onset of coronavirus crisis

NEW YORK: The S&P 500 on Tuesday closed in on its February record high, returning to levels last seen before the onset of the coronavirus crisis that caused one of Wall Street’s most dramatic crashes in history.

The benchmark index was about half a percent below its peak hit on Feb. 19, when investors started dumping shares in anticipation of what proved to be the biggest slump in the US economy since the Great Depression.

Ultra-low interest rates, trillions of dollars in stimulus and, more recently, a better-than-feared second quarter earnings season have allowed all three of Wall Street’s main indexes to recover.

The tech-heavy Nasdaq has led the charge, boosted by “stay-at-home winners” Amazon.com Inc., Netflix Inc. and Apple Inc. The index was down about 0.4 percent.

The blue chip Dow surged 1.2 percent, coming within 5 percent of its February peak.

“You’ve got to admit that this is a market that wants to go up, despite tensions between US-China, despite news of the coronavirus not being particularly encouraging,” said Andrea Cicione, a strategist at TS Lombard.

“We’re facing an emergency from the health, economy and employment point of view — the outlook is a lot less rosy. There’s a disconnect between valuation and the actual outlook even though lower rates to some degree justify high valuation.”

Aiding sentiment, President Vladimir Putin claimed Russia had become the first country in the world to grant regulatory approval to a COVID-19 vaccine. But the approval’s speed has concerned some experts as the vaccine still must complete final trials.

Investors are now hoping Republicans and Democrats will resolve their differences and agree on another relief program to support about 30 million unemployed Americans, as the battle with the virus outbreak was far from over with US cases surpassing 5 million last week.

Also in focus are Sino-US tensions ahead of high-stakes trade talks in the coming weekend.

“Certainly the rhetoric from Washington has been negative with regards to China ... there’s plenty of things to worry about, but markets are really focused more on the very easy fiscal and monetary policies at this point,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

Financials, energy and industrial sectors, that have lagged the benchmark index this year, provided the biggest boost to the S&P 500 on Tuesday.

The S&P 500 was set to rise for the eighth straight session, its longest streak of gains since April 2019.

The S&P 500 was up 15.39 points, or 0.46 percent, at 3,375.86, about 18 points shy of its high of 3,393.52. The Dow Jones Industrial Average was up 341.41 points, or 1.23 percent, at 28,132.85, and the Nasdaq Composite was down 48.37 points, or 0.44 percent, at 10,919.99.

Royal Caribbean Group jumped 4.6 percent after it hinted at new safety measures aimed at getting sailing going again after months of cancellations. Peers Norwegian Cruise Line Holdings Ltd. and Carnival Corp. also rose.

US mall owner Simon Property Group Inc. gained 4.1 percent despite posting a disappointing second quarter profit, as its CEO expressed some hope over a recovery in retail as lockdown measures in some regions eased.

Advancing issues outnumbered decliners 3.44-to-1 on the NYSE and 1.44-to-1 on the Nasdaq.

The S&P index recorded 35 new 52-week highs and no new low, while the Nasdaq recorded 50 new highs and four new lows.