Preparing Egyptians for Austerity, al-Sissi Cuts Own Pay

New president calls on population to make financial sacrifices, after three years of volatility have battled tourism and investment, worsening a huge unemployment problem and widening budget deficit.

Egyptian President Abdel Fattah al-Sissi
Egyptian President Abdel Fattah al-Sissi. Reuters

REUTERS - Egypt's new president Abdel Fattah al-Sissi pledged on Tuesday to give up half his salary and property and called on the Egyptian people to make similar sacrifices in a bid to prepare the public for a period of painful economic austerity. Egypt's economy is forecast to grow just 3.2 percent in the fiscal year that begins on July 1, well below the level needed to create enough jobs for its rapidly growing population of 86 million and alleviate widespread poverty.

The turmoil of the last three years, in which two presidents have been overthrown and hundreds of people have been killed in the streets, have battered tourism and investment, worsening a huge unemployment problem and widening the budget deficit.

The government will also have to tackle the legacy of decades of corruption and red tape and a costly subsidy system - food and fuel subsidies alone consume about a quarter of total government spending.

In an impromptu speech at a military graduation ceremony, al-Sissi said he had been involved in lengthy discussions over the proposed 2014/15 budget this week and had refused to sign off on a plan he said was too dependent on ballooning borrowing. The comments appeared designed to prepare public opinion for further austerity measures, such as subsidy reductions, to allow for deeper reforms of an ailing economy. "We said we would revise this budget because I cannot bear to accept it when it contains this level of deficit," he said. "I want to think of the children that are coming and to leave them something good, but this way we will leave them nothing. If the debt keeps accumulating like this, we won't leave them anything good."

Half pay

Egypt's budget deficit reached 14 percent of economic output in the last fiscal year, which ended in June 2013.

Over the past two years, Egypt has depended on aid from wealthy Gulf Arab allies who sent more than $20 billion worth of grants, loans and petroleum products, according to numbers given by al-Sissi during his election campaign. The aid has kept the Egyptian economy from sinking but al-Sissi said the country could not keep turning to its lenders and donors forever and would have to take difficult cost-cutting measures in order to balance its books.

Speaking in the local dialect of Arabic used by ordinary Egyptians, al-Sissi proposed to lead by example, giving up some of his own pay and vowing to apply a salary cap for higher earners in the public sector. "There must be real sacrifices from every Egyptian man and woman. I take the maximum salary of 42,000 pounds ($5,900) and no one will take more than the maximum," he said. "I am going to do two things: I am not going to take half of this sum and my property, even what I inherited from my father, I will give up half for the sake of our country."

Al-Sissi called on Egyptians inside and outside the country to make personal sacrifices for the greater good and said the demands of vested interests or individual factions would no longer be pandered to.

The comments, and al-Sissi's frank and informal manner, appeared designed to set him apart from Hosni Mubarak, another former military man who was overthrown in 2011 after 30 years in power. Mubarak's rule was characterized by crony capitalism, stoking public discontent that helped to fuel the uprising. Since then, successive governments have tried to steer a course between boosting revenues without discouraging investors.

Al-Sissi ousted elected Islamist President Mohammed Morsi last July, following mass protests against his rule. Though Morsi had failed to win the trust of the Egyptian business community or attract foreign backing, bringing the economy to the edge of bankruptcy, his downfall prompted a wave of violence and protests that only deepened the crisis.

Al-Sissi's speech is likely to be welcomed by the business community, that has long called for Egypt's economic challenges to take center stage in policy making. "The elephant in the room is that historically no one discussed economics in public. At last someone is bringing the economic debate to the public," said Angus Blair, chairman of business and economic forecasting think-tank Signet.

But his call for Egyptians to tighten their belts may ring hollow to the millions who already struggle with multiple low-paid jobs to make ends meet. Al-Sissi's message that it was up to ordinary citizens to step up and work hard alienated some Egyptians during the election campaign and deterred some on the poverty line from voting.

Additional reporting by Shadia Nasralla in Cairo.