New prime minister to tackle ailing Egyptian economy

27 February 2014

Resignation of El-Beblawi could pave way for Field Marshall Al-Sisi’s presidential bid

Ibrahim Mahlab, a former head of the state-owned construction company, Arab Contractors, has been appointed as Egypt’s new prime minister.

He was previously the housing minister within former prime minister’s Hazem el-Beblawi’s government, which resigned on 24 February.

Mahlab was a senior official in the former president Hosni Mubarak’s National Democratic Party and is said to have strong links with the military.

The change in leadership is being seen as a way of showing Egyptian population that the government will take a tougher stance on improving the country’s deteriorating economy and tackling the rising threat of terrorist attacks.

In a press conference on 25 February, Mahlab said his government will work on “maintaining security, combating terrorism and attracting investment”.

He said approximately half of the ministers in El-Beblawi’s government will keep their roles.

Some analysts interpret the resignation of the old cabinet as a way of supporting Field Marshall Abdul Fattah al-Sisi’s yet-to-be announced bid for presidency.

Al-Sisi was the defence minister under the out-going government and has been tipped to be the favourite in the race to become president. The presidential elections are due to take place by April, followed by the parliamentary elections.

“The resignation of the cabinet is to avoid a possible contamination of Al-Sisi’s bid for presidency due to public dissatisfaction with the current government. He wants to give his presidential bid some legitimacy,” Oliver Coleman, senior analyst, Middle East and North Africa, at UK-based consultancy firm Maplecroft, tells MEED.

“There is every indication that Al-Sisi will announce his candidacy soon,” he adds.

Although unexpected, the resignation of El-Beblawi is forecast to have limited impact on the financial markets and investor appetite for Egyptian risk.

“The change in government will have little dramatic impact on foreign investor sentiment in Egypt,” says Henry Smith, senior analyst at UK-headquartered risk consultancy Control Risks.

“In other countries in the region, a resignation of a government would have a more significant effect on foreign investor sentiment,” he adds.

Since the ousting of President Mohamed Mursi in July last year, there have been some small improvements to the Egyptian economy. International reserves held by the Central Bank stabilised at $17.1bn in January, a marginal increase on December’s figures and substantially stronger than the reserves held by Mursi in the months preceding his removal from power.

Reserves were significantly boosted by the billions of financial aid extended by GCC countries following the removal of Mursi.

In January this year, US ratings agency Fitch Ratings removed Egypt’s long-term foreign-currency rating off negative outlook for the first time since January 2011.

Fitch forecasts that the country’ economy will improve over the next two years, but by the end of 2015 it will still be weaker than it was in 2010.

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