Egypt Plans Quick Steps to Spur Economy

Deputy PM for economic affairs Ziad Bahaa el-Din said that Egypt's new cabinet plans quick steps to spur the economy while laying the ground for a broader "Marshall Plan" to present to Gulf countries and other donors.

The cabinet aimed to cut red tape and restart stalled investments to encourage a revival in business activity, he added.

"Ultimately, there isn't another sustainable source of closing the deficit except to get the economy running, to get growth going, to get people to work, to get incomes paid, to get taxes paid as well," Bahaa el-Din told Reuters.

"The quicker we get the economy running again, the quicker you can at least begin to stop the bleeding, " he added. Bahaa el-Din said the cabinet expects to be in power for less than seven months, and lacks a popular mandate to take major measures to rein in Egypt's rising budget deficit.

The government inherited a budget deficit that since January has been running at around $3.2 billion a month, equivalent to almost half of state spending.

But it is under intense pressure to avoid unpopular steps such as increasing taxes or reducing spending on energy and food subsidies and the new finance minister said last week it will try to avoid major austerity measures.

Bahaa el-Din said the government is looking to speed up investments already in place rather than seek new projects at a time when investors might still be wary of Egypt.

"It's not a time when you necessarily expect major new investment to come in," said Bahaa el-Din, who has a doctorate in banking law from the London School of Economics and until early 2011 headed Egypt's financial regulatory authority.

Instead, the government will look at changes in rules and regulations and the investment environment, and at encouraging financial institutions once again to take risks and to lend.

"First of all, you need to restore the confidence of those working in the ministries, in the bureaucracy, and they can begin to proceed with their work without being overly worried and looking over their shoulders all the time," he said.

"The quickest thing you can do to get this bleeding stopped is to tackle what is already there, so you don't have to rethink of new investments on the moon."

"There is significant goodwill out there, in the Gulf and elsewhere in the world. Here I come to what I call the Egypt Marshall Plan. You don't want to be in the situation that when you have the goodwill and the money to be invested you don't know quite where to take it," he said.

The state social fund has plans in the pipeline to create several hundred thousand part-time jobs in infrastructure projects and maintenance, he said.