A Prescription for Restoring Economic Normalcy

Written by Dina Abdel Fattah

by Nada Khaled

Sharp swings have been observed in Egypt’s FX black market after the news of the signing of an agreement to implement Ras El Hekma resort, in northwest Egypt, with investments reaching $22 billion went viral. I think that any move towards creating self-generated foreign currency sources will be directly reflected in currency exchange rates on the black market, even though I’m not able to understand the ambiguity and secrecy surrounding the important economic agreements and discussions.

This emphasizes how crucial it is to move quickly on the several axes of establishing local-generated foreign exchange sources in order to resolve the country’s economic problems. In the upcoming time frame, it will be crucial to handle state-owned asset sales properly and quickly.

Strict administrative procedures

There has to be uniformity among the government agencies in charge of finalizing the sale of public assets. It’s also necessary to take into account the expense and impact on the total economy of missing the selling procedure deadlines. A list of all projects that are prepared to accept foreign direct investment must also be provided. Sale processes have to be announced and carried out right away. Accountability must be taken against officials who obstruct the implementation of the selling processes.

The competitiveness and diversity of the Egyptian economy attract investments, while the country’s investment framework deters foreign capital. This flaw may be fixed by modifying a set of straightforward management protocols and putting in place a stringent monitoring and control system to get rid of bureaucracy, which turns off investors, and corruption, which has grown incredibly pervasive across all industries.

It is obvious that the cycle of paperwork and clearances needed to localize investment is longer than the actual manufacturing cycle.

Political moves within the state happen far more quickly than procedures for implementation, oversight, and control carried out by lower levels of government officials. This has to be fixed right now since it is a weak point in the investment system that prevents fresh foreign money from entering the system, encouraging borrowing and debt accumulation.

Political action must be taken to make clear the immediate deterrent implications for obstructing the flow of foreign direct investment. Such offenses should be classified as national security crimes rather than merely cases of workplace irresponsibility.

The necessary quick processes are only instruments for monitoring, regulating, and controlling. Enforcing some procedures that are now overlooked might enhance the investment climate.

Secure path


There is no other secure path out of this extraordinary economic crisis but to restore the capacity to furnish foreign exchange. Additionally, selling public assets and luring foreign direct investment is a significant task that calls for coordination between the government and the private sector.

There are other mechanisms whose trajectory has to be adjusted besides the sale of public assets and direct foreign investment. The three primary self-created forex sources are exports, which make up the majority of the source, tourism, which can provide all basic forex inflows, and expat remittances, which require coordinated efforts to rectify incorrect processes that have a detrimental impact on the remittance inflows.

I think that certain officials are responsible for improperly managing the many sources of self-created foreign exchange that should yield enormous sums of money. The only immediate remedies for these sources have to do with how those officials manage the resources.

Throughout this crucial phase, when carelessness or negligence result in the loss of an entire people’s life, a follow-up, control, and monitoring system as well as a criminal justice system with the imposition of criminal penalties rather than administrative ones, should be imposed.


Eradicating FX black market

The second axis of the urgent economic reform procedures is the eradication of the black market. We are living in a time where the illicit market has blown out to never-before-seen proportions.

I firmly believe that those officials who have allowed the black market to grow to an unprecedented extent should be held accountable for their carelessness or tardiness in making decisions causing innocent people to suffer.

A broad awareness campaign must be launched immediately both domestically and internationally in order to mitigate the negative effects of this situation. This campaign should be conducted not only out of love for the country but also for the sake of Egyptians’ own self-interest, as actions that prioritise short-term gain and profit from the worsening economic conditions will ultimately result in losses over the medium and long terms.

Disasters will arise if the instability that is now roiling the market is not curbed. The expected campaign to elucidate the ramifications and outcomes of that disarray has to get underway immediately. The gravity of the crisis and the need to put nationalism ahead of all personal interests must be explained.

The campaign must target schoolchildren and university students in order to understand the country’s circumstance and the measures that must be done to overcome the crisis.


Expenditure priorities


The current stage also demands a detailed assessment of forex priorities, as well as the state’s quick action to create lists of products and services on which foreign currency expenditure is forbidden for at least one year, to be extended as required. Exceptions are not tolerated in order to restore normalcy and guarantee that everyone participates freely and responsibly.


Fixing FX rates


Finally, it is time for the market’s long-awaited step of fixing exchange rates, which I feel is required given the banking sector’s capacity to issue foreign exchange to meet all immediate demands.

To be effective, this strategy must be executed concurrently with all of the aforementioned measures aimed at permanently controlling the foreign exchange market. At this point, creative monetary procedures and policies must be implemented to meet the present conditions, which include injecting the necessary liquidity into the banking system and issuing regulatory measures to manage the foreign currency market.
I believe that such policies would provide a two-month grace period for any FX deposits in the banking system without requesting details regarding its origin. Following that, currency trafficking would be deemed a national security crime punishable by harsh penalties because it affects the entire country.


Market regulation


Then we go on to the most important step of market regulation: converting the whole country’s market to cashless transactions. According to what I’ve gathered, all of the infrastructural equipment required to link the different payment partners in the market is currently in place. It is necessary to activate them through co-operation among ministries, payment businesses, and banks. All of these operations take minimal time or significant expenditure, and the work “mechanism” may be quickly imported from the most advanced markets.

Once this stage is finished, corruption and bribery will be abolished, as will obstruction of procedures, delaying people’s transactions, and tiring them with approvals and procedures. Corruption costs billions of dollars in state funds, which flow into the wallets of corrupt persons, paralyzing public transactions.

The upcoming reform measures in light of President Abdel Fattah El-Sisi’s new presidential term require presidential decisions to establish a strong follow-up body with prioritized duties and responsibilities that are different from the priority list of the previous period to solve the current crisis, through the adoption of regulatory measures and the application of law.


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