2 minutes with Abla Abdel Latif: Real economic reform requires more than just a currency float and subsidy cuts

Executive director of ECES Abla Abdel Latif (Photo courtesy of ECES)

As part of a discussion on the effect of regional developments on Egypt’s economic outlook organized by the Egyptian Center for Economic Studies (ECES), executive director of the center Abla Abdel Latif explained how Egypt needs more than just a currency floatation and subsidy alleviation in order to achieve real economic reform. She also looked at how to incentivize investors and the country’s primary budget surplus.  

What needs to be done in order to achieve real economic reform?
We need to reduce our dependence on monetary policy. We either play around with the interest rate or the dollar price. Economic reform does not only mean that one floats the currency and alleviates subsidies. That is what the country worked on so far. But real reform will ensure the sustainability and continuation of the economic reforms that we have already started. This includes solving the issues of agriculture and industry.

How can Egypt incentivize investors?
In terms of investment, we do not really have to incentivize investors as much as remove the challenges and burdens facing investments in Egypt. This in itself would be an incentive. The keywords are transparency, policy flexibility and not sending out contradicting signals. Contradicting signals show that we do not have a strategy and are the main reason for keeping investments away. The profit margin of the local and foreign investors is high – we are an attractive country for investment, but the reason why foreign investors are not coming is that they do not see a clear, future strategy and vision.

Foreign investment is hard to attract due to international developments and local issues as well. But it seems that the local private sector which would always prefer to invest in Egypt is forgotten. The investments of the local private sector will show confidence to the outside world; hence, it would attract foreign investors. China and India are starting to use their large populations to drive the countries forward, but we are not doing the same. We do not penetrate the governorates, we did not complete the infrastructure of industrial zones etc. This is all part of real economic reform, which includes institutional reform and fixing issues. If we manage to complete our institutional reform in one year, half of our problems will be solved.

What is your take on the primary budget surplus which Egypt achieved in the past fiscal year?
The primary deficit surplus does not include the debt service, which does not make sense. We cannot exclude the debt service because that is the main thing we suffer from. Additionally, in order to best manage debt, we need to know where the money we took went to and what kind of return it will bring.  

How is ECES joining the conversation and supporting economic growth and social justice?
The ECES is focusing on helping the state move forward. Hence, we work with several entities, such as the Federation of Egyptian Industries (FEI), American Chamber of Commerce (AmCham) and the Central Agency for Public Mobilization and Statistics (CAPMAS), to pinpoint the gaps and contribute to policymaking for different sectors, as well as supporting entrepreneurship and vocational training.

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