Lew Urges Egypt to Push Forth with Reforms to Stabilize Economy

U.S. Treasury Secretary Jacob J. Lew urged Egypt to persist with economic and political changes that could attract private investment.

Egyptian President Abdel-Fattah El-Sisi has pledged to restore stability and fix the economy, and announced a new economic program this summer. Speaking in Cairo today, Lew emphasized the importance of both individual freedoms and a strong economy.

“We welcome these reforms and urge the Egyptian government to continue on its path,” Lew said at a press conference with Hany Kadry Dimian, Egypt’s finance minister, after they met. “We discussed the rule of law and how to create an open political environment in which individual rights are fully respected to further bolster Egypt’s ability to attract international investment.”

El-Sisi, who was elected this year after leading the military ouster of Islamist President Mohamed Morsi in 2013, announced economic programs that introduce new taxes, increase others and reduce energy subsidies.

Such changes are “starting to have a positive impact on the economy,” according to a World Bank overview. Egypt’s growth is expected to accelerate to 3.5 percent in fiscal year 2015 after 2.2 percent growth in 2014, according to International Monetary Fund projections.

The “well-being of the Egyptian economy is an important U.S. interest,” Lew said today.

Investment in Stability

Between 1948 and 2014, the U.S. provided Egypt with $74.65 billion in foreign aid, calculated in historical dollars and not adjusted for inflation. That includes $1.3 billion a year in military aid from 1987 to the present, according to a Congressional Research Service report.

“U.S. policy makers have routinely justified aid to Egypt as an investment in regional stability,” the report states.

The U.S. cut some aid deliveries this year, releasing only $575 million of the annual military aid after Morsi’s overthrow. Since his removal, Egyptian security forces have killed hundreds of Islamists and arrested more than 20,000 others in what rights group say is evidence that a new police state has emerged. The government denies limiting freedoms.

Secretary of State John Kerry said in June that full aid would resume soon.

Egypt has a “critical role” to play in denouncing the ideology of Islamic State,Kerry said in a Sept. 13 speech in Cairo. The group, which broke off from al-Qaeda and is known for brutal tactics such as beheadings, has captured areas of Iraq and Syria and seeks to establish a “caliphate” — a state ruled by a single political and religious leader according to Islamic law.

Tracking Money

The U.S. is adapting its money-tracking tactics to choke off Islamic State’s oil-smuggling routes and restrict its use of Iraqi and Syrian banks, David Cohen, the Treasury’s undersecretary for terrorism and financial intelligence, said last week.

“We are making progress, but it’s going to be a long and sustained effort, and we are in the United States determined to work with all of our allies in the region” on a military and financial basis to stop Islamic State’s flow of resources, Lew said today. He said the U.S. and Egypt have a “common security interest” in combatting the group.

Lew is visiting Egypt, Tanzania and South Africa this week to discuss regional economic development and relationships with the U.S. This marked his first press appearance on the trip.

Source: Bloomberg