* New stimulus package seen putting extra strain on budget
* Government signal to press ahead with Suez Canal plans
* Economy pounded by political turmoil
By Asma Alsharif and Yasmine Saleh
CAIRO, Nov 11 The Egyptian government will
launch a new economic stimulus package by the end of the year,
the finance minister said on Monday, bringing forward spending
plans that will help revive the economy but put even more strain
on state coffers.
Pointing to efforts to attract new investment, the
military-backed government also said it would launch a tender to
draw up plans to develop a corridor around the Suez Canal,
reviving a mega-project tabled by deposed president Mohamed
The government ministers were speaking at a Euromoney
conference aimed at boosting confidence in an economy battered
by close to three years of political turmoil, dating back to the
2011 uprising against President Hosni Mubarak.
Boosted by financial support from Gulf states hostile to
Mursi's Muslim Brotherhood, the government installed in July is
pumping billions of dollars into the economy of the Arab world's
most populous nation.
Finance Minister Ahmed Galal said the second stimulus
package, previously estimated at 24 billion Egyptian pounds
($3.5 billion), would be launched "before January". The
government had previously indicated it might only be brought in
early next year.
The first stimulus package was initially set at 22.3 billion
pounds, but the government announced on Oct. 21 it had increased
it to 29.6 billion pounds.
"The second package is a heavy burden on the budget
especially since it is not yet clear where the financing will
come from," said Moheb Malak, an economist at Prime Holding.
"In terms of growth it is expansionary and a positive thing.
However, most of the first package went into consumption," he
said, adding that the second package should be directed towards
investment in areas such as transport infrastructure.
During Mursi's year in power, Egypt's budget deficit widened
to almost 14 percent of gross domestic product (GDP), a number
the government, backed by Gulf aid, hopes to reduce to around 10
percent this year.
It also hopes investors and tourists will bring dollars,
taking pressure off the Egyptian pound, which has lost almost 16
percent of its value since the uprising and even more on the
Egypt's finances are in a precarious state with a massive
deficit, but the government has rejected the conventional wisdom
of International Monetary Fund-prescribed austerity measures.
If the plan fails, a new government expected to be elected
early next year could find itself deep in debt, its currency
overvalued and an economy in crisis.
In separate comments to financial daily Al-Mal, Galal said
the ministry was coordinating with the planning ministry to
decide the size of the new spending and the sources of finance
"without that causing new strain on the public finances".
Egypt's economy has been crippled by social and political
turmoil since Mubarak's downfall in 2011, but has been helped in
recent months by funding from several Gulf Arab States that are
hostile to the Muslim Brotherhood.
Saudi Arabia, Kuwait and the United Arab Emirates promised a
combined $12 billion in loans, grants and fuel shipments after
the army, prompted by mass protests, overthrew Mursi on July 3.
Investment Minister Osama Saleh signalled the government
intended to press ahead with plans to develop the Suez Canal
He said a tender to draw up the plans would be finalised by
the end of the month and offered globally. He did not elaborate.
It echoes plans outlined by the Mursi administration to
revive and expand a series of projects initiated in the late
1990s to turn the banks of the Suez Canal into a world trading
and industrial centre.
The Suez Canal is the fastest shipping route between Europe
and Asia and a crucial source of foreign exchange income for
Egypt, bringing in some $5 billion a year in tolls.
Malak said: "It is about time for it to receive additional
investment and development so it can remain as a strategic route
... there is a lot to do."
He added: "The size of the development and the time frame is
still vague. What will they do, when will it start?"