Last March i had a discussion where me and 2 of my collegue talked about Egypt’s current fiscal policy under Dr. Radwan the new finance minister,
Discussions and arguments were exchanged and finally one of them suggested that a strong governmental intervention is likely to happen.
The other was inclined to side with this speculation while I remained skeptical and feared the new minister deciding to take that course.
Sadly (for me) the last week (that was in march showed more signs that indeed a strong and aggressive governmental intervention in the form of public spending will take place.
What follows is my argument of why this should not take place:
First of all: Why is the government intervening?
It argues that governments should solve problems in the short run rather than wait for market forces to do it in the long run, because “in the long run, we will be all dead”.
There tools will be an incoherent mix of open market operations (borrowing debt) and money printing.
They care most of all about inflation and don’t want to risk inflation in favor of decreasing future interest rates.
I believe that this will cost us all a lot in the future let alone the highly doubtful positive effect of this policy
Borrowing money has become more expensive than before for the Egyptian government, the gradual increase will end us borrowing to pay the interest on the money we borrowed before.
Government debt will increase and deficit will grow in the long run, note that the cost of borrowing is increasing,
Egyptian treasury Bonds pays interest rate of 12.6 % for 7 years and 11.63 % for 3 years.*
That’s alarming enough to let us think before deciding on taking popular Keynesian policies.
We should think to slash not to spend!
Though some will argue that we face critical problems in the mean time like:
High unemployment rate
Little consumption
Economic crunch
I myself can’t find a proper solution but while worrying about gigantic debt I believe that desperate, unpopular measures should be made like:
Cutting Subsidies
Taxes on Energy (to counter the rise in prices of commodities)
Hope i made my point and thanks for your valuable take on the subject,
Discussions and arguments were exchanged and finally one of them suggested that a strong governmental intervention is likely to happen.
The other was inclined to side with this speculation while I remained skeptical and feared the new minister deciding to take that course.
Sadly (for me) the last week (that was in march showed more signs that indeed a strong and aggressive governmental intervention in the form of public spending will take place.
What follows is my argument of why this should not take place:
First of all: Why is the government intervening?
It argues that governments should solve problems in the short run rather than wait for market forces to do it in the long run, because “in the long run, we will be all dead”.
There tools will be an incoherent mix of open market operations (borrowing debt) and money printing.
They care most of all about inflation and don’t want to risk inflation in favor of decreasing future interest rates.
I believe that this will cost us all a lot in the future let alone the highly doubtful positive effect of this policy
Borrowing money has become more expensive than before for the Egyptian government, the gradual increase will end us borrowing to pay the interest on the money we borrowed before.
Government debt will increase and deficit will grow in the long run, note that the cost of borrowing is increasing,
Egyptian treasury Bonds pays interest rate of 12.6 % for 7 years and 11.63 % for 3 years.*
That’s alarming enough to let us think before deciding on taking popular Keynesian policies.
We should think to slash not to spend!
Though some will argue that we face critical problems in the mean time like:
High unemployment rate
Little consumption
Economic crunch
I myself can’t find a proper solution but while worrying about gigantic debt I believe that desperate, unpopular measures should be made like:
Cutting Subsidies
Taxes on Energy (to counter the rise in prices of commodities)
Hope i made my point and thanks for your valuable take on the subject,
