Egypt plans stimulus package after blow to growth

Thursday, 24 February 2011 00:10 - - {{hitsCtrl.values.hits}}

CAIRO, (Reuters) - Egypt is planning a stimulus package after its economy was badly hurt by political turmoil, Finance Minister Samir Radwan said. He estimated that the political unrest that led to the ousting of President Hosni Mubarak would reduce growth to 4.3 percent in the financial year to end-June from the government’s previous forecast of 6 percent.

Egypt’s economy has been hurt by a collapse in tourism and foreign investment since protests erupted on Jan. 25. Banks, businesses and factories have only reopened in the last few days, and the stock exchange remains closed indefinitely. “The goal of the stimulus package is to get the economy on its feet again,” Radwan told reporters after meeting U.S. Undersecretary of State William J. Burns.

Radwan said the Finance Ministry was still working on the stimulus package and did not know how big it would be, but he hoped it would be financed both on-budget by the government and off-budget by the private sector.

“The whole issue of fiscal space is becoming a bit tighter because of the emergency measures we have taken in the past three weeks,” he said. “Therefore we have to draw on the private sector.” Radwan said that Egypt wanted to draw on help from “our development partners.” Last week Radwan estimated that the government’s budget deficit would rise as high as 8.4 percent of gross domestic product this financial year compared to a forecast made before the crisis of 7.9 percent.

He said he reassured Burns that Egypt would not retreat from economic reform or change the basic economic philosophy it has followed since it adopted a liberal reform programme in 2004.

Burns told reporters that the United States was prepared to help Egypt. “We want to do everything we can to be supportive, and that includes providing support for economic recovery as well as for Egypt’s economic modernisation,” Burns said. “There is a range in which we can be helpful.”