By Nehal El-Sherif, dpa
16.05.2014 | picked up by China Post
Cairo (dpa) – More than
three years ago, Egyptians took to the streets demanding "bread, freedom
and social justice."
After two presidents were
ousted and unrest spread in the Arab world's most populous country, millions of
Egyptians seem willing to sacrifice freedom for the fulfilment of the two other
two demands.
Neither ex-army chief
Abdel-Fattah al-Sissi nor his only challenger, leftist politician Hamdeen Sabahy,
has unveiled a clear plan to achieve these demands after the May 26-27
presidential elections.
Al-Sissi, whose popularity
soared after he announced the overthrow of Islamist president Mohammed Morsi in
July, is widely expected to win.
Economist Rashad Abdou sees
a "problem" in Sabahy's election programme.
"Since he knows that
his election chances are slim, he is making excessive promises to help workers,
create jobs and support small- and medium-scale enterprises ... But he does not
specify how he will get the money to do all of this," Abdou told dpa.
"Al-Sissi's programme
also lacks a lot of things, since he was a military man and had little or no
relationship with other state sectors," he added.
Since Morsi's toppling,
oil-rich Gulf countries have committed some 20 billion dollars to Egypt, and
many expect this support to continue if al-Sissi takes office.
While the Gulf aid has given
Egypt some economic relief, it will not fix the country’s problems, according
to Steven A. Cook, a senior fellow for Middle Eastern Studies at the Council on
Foreign Relations.
"By financing new
spending with grants from the Gulf, Egypt is merely shifting fiscal problems
into the near future," he wrote in a recent paper. "Second, receiving
more assistance only masks problems that are rooted in irrational and
conflicting economic policies."
These policies, including
unsustainable food and fuel subsidies and a tax policy that does not produce
enough revenue, place significant pressure on the government's budget,
according to experts.
"The (next) government
will have to strike a balance between the need to stimulate growth and to
achieve fiscal sustainability," said David Butter, an associate fellow of
the Middle East and North Africa Programme at Chatham House.
"I would expect efforts
to continue to rein in energy subsidies and the government will look to
increase tax revenue, though not necessarily through measures such as hiking
the corporate tax rate, as this could be counter-productive," he added.
For years, critics have said
Egypt's subsidies on basic commodities do not benefit those in need and even
foster corruption.
In a bid to change this, the
incumbent government has announced plans to start a smart card-rationing system
for two vital commodities: bread and fuel.
Earlier this month, Supplies
Minister Khaled Hanafi said a smart-card system for bread distribution rolled
out in the coastal city of Port Said reduced wheat consumption by 30 per cent.
There are similar plans for
fuel: to end subsidies on 95-octane gasoline and set quotas for other
subsidized fuel.
In the 2011-2012 budget,
energy comprised 72 per cent of the whole subsidy allocation, while food
subsidies accounted for 14 per cent.
A bigger challenge for the
next president will be cutting subsidies for energy-intensive industries such
as steel and cement that widely benefit from the subsidy of natural gas.
Abdou believes cutting
subsidies is vital. However, he does not think it would eventually benefit the
lower classes.
"The finance minister
said the budget deficit will reach 340 billion pounds (around 48.5 billion
dollars) this year," said Abdou, who heads the Cairo-based Egyptian Forum
for Economic and Strategic Studies.
"Yet, the rich are
actually stronger than the state. So, they will add cost difference to the
price of their product, thus affecting the low-income earners."
More than 40 per cent of
Egypt’s 85-million-strong population live below the poverty level of 2 dollars
per day, according to unofficial figures.
To achieve social justice
and ease the economic crisis, Abdou said the government needs to start a
dialogue with the business sector and impose a certain profit margin to rein in
inflation, which stood at 9.1 per cent last month.
The government has recently
increased prices of natural gas for factories and houses, sparking public fears
about a fresh spate of price hikes.
International Monetary Fund
chief Christine Lagarde has described Egypt's energy subsidy reforms as
"encouraging" and called on the next president and parliament to
press ahead with reforms.
"I think no matter who
is in charge, economic reforms will be a must," she told CNN.
"And if that is done
thoroughly, decisively, I'm sure there will be growth and investment. But the
reform stage is certainly a condition to that."