Egypt's finance minister Samir Radwan said the stock market will stabilise this week as the government makes $250 million available to buy shares, after the index dropped to the lowest level in almost two years following a seven-week halt.
The bourse has "surpassed all my expectations" and will not experience the same volatility as last week, Mr Radwan said in an interview in London yesterday. Egypt's benchmark EGX30 Index plummeted 12 per cent on March 23 and 24 as the bourse reopened for the first time since a popular uprising that led to the ouster of President Hosni Mubarak.
"I was there, my heart dropped when I saw the EGX30 diving down. But when we reopened again I was reassured. Now we are doing well, and I'm assured through the chairman of the stock exchange that the demands to buy are very healthy."
The minister was in London for a conference promoting investment in Egypt after the revolt against the former regime caused companies to close and tourists to flee. The Finance Ministry now expects gross domestic product to grow between 3 and 3.5 per cent this year, Mr Radwan said, compared with a forecast of 5.8 per cent before the revolution.
The ministry has made $250 million available for the state- run clearing house to buy shares until they return to pre-uprising prices, Mr Radwan said. This fund is in addition to the exchange's own risk fund, which has already been used up, he said.
He told state-run television on February 1, the day after he was appointed by Mubarak, that he would not lower government subsidies on fuel and food. These are equivalent to as much as 5 per cent of GDP, widening the country's budget deficit as food and oil prices rise.
"The present structure is highly inequitable, and doesn't serve the people to whom the subsidies are directed," he said today. "But to touch it now would be suicide. We are regaining the confidence of the Egyptian people, and we would like that confidence to be on a solid basis."
Subsidies amount to 6 per cent of the income of the poorest 40 per cent of the population, while adding 28 per cent to the income of the top 20 per cent, he said.
"We want a much more efficient system," he said. "We are subsidising five-star hotels, brickmaking factories and so on. Is that fair?"
Mr Radwan also promised there would be "no rolling back of reforms" to the country's economy. "I am authorised to say this, coming to the London meeting, by the Cabinet, by the military council, to reassure everybody. If anything, we would like to go forward."
Changes being considered include measures addressing the availability of land, licensing, bankruptcy and corruption, he said.