Inflation Rate, External Debt Are Expected To Raise; Former CBE’s Governor

Dr. Mahmoud Abul Eyoun, Professor of Economics at University of Zagazig and Chief Economic & Financial Advisor at Kuwait Fund For Arab Economic Development (KFAED), has emphasized on the importance of reducing budget deficit and of adopting contractionary monetary policy.

Additionally, Abul Eyoun – who had also served as the Governor at Central Bank of Egypt (CBE) from 2001 till 2003 – has asserted that it is necessary to restore the effectiveness of market forces and to put a vision so as to strengthen the price support .

“It is crucial neither to interrupt nor to interefere with the market forces until the gap in the Aggregate Demand (AD) is filled, the basics of Inflation Targetting Regime as well as contractionary monetary policy are adopted even if the transitional period is shortened.” Abul Eyoun added.  “The economic reform is needed for the country to go forward.”

He also emphasized on the necessity of adopting a developed monetary policy which would create an approperiate atmosphere for the private investments and an expansionary fiscal policy along with financing the deficit through non-inflationary local and foreign sources. He also expected that the coming period will witness relatively high inflation rates and an increase in the external debt.

Former CBE’s Governor has suggested, during the seminar conducted by the Egyptian Center for Economic Studies, a number of priniciples of the economic policy for the transitional period. He asserted that reforming the economy’s path during the transitional phase will be through balancing between the AD and Aggregate Supply (AS), control price mechanism and the deficit in balance of trade and not to neglect the importance of foreign reserves.