Jan. 6 (Bloomberg) -- Egyptian President Mohamed Mursi swore in new security and finance chiefs and bolstered the Islamists in his government in an overhaul aimed at charting a new course for the nation as it pushes ahead with the resumption of talks with the IMF.
Mohamed Ibrahim, former head of the prisons department, took over as the interior minister, the state-run Middle East News Agency reported. El-Mursi el-Sayed Hegazi, a University of Alexandria economics professor and specialist in Islamic finance, replaced Momtaz el-Saieed as finance minister a day before a meeting with the International Monetary Fund’s Middle East and Central Asia Director, Masood Ahmed.
The new lineup, which may be altered as a result of parliamentary elections this year, is aimed at replacing at least some of the ministers blamed for realizing few of the gains hoped for following the January 2011 uprising that ousted Hosni Mubarak. Almost two years of turmoil has hampered economic recovery, draining almost 60 percent of the country’s foreign reserves and prompted the Central Bank to auction dollars, a move amid at stemming the drop even as it pushed the Egyptian pound to an all-time low.
“This will more or less be a government that tries to run things on a daily basis and realize achievements on an economic scale,” Omar Ashour, director of the Middle East program at the U.K.’s University of Exeter, said by phone today. The strategy for Prime Minister Hisham Qandil “is to deliver quick results to say ’we did something’,” ahead of the parliamentary vote.
Mursi chaired a meeting of the Cabinet after the swearing-in ceremony, according to MENA. Qandil said after the meeting that realizing “security stability is the key to economic stability.”
With the challenges confronting Egypt and the polarization that emerged as a result of the divisive constitution vote last month, it will be “difficult to have major achievements” ahead of the elections, Ashour said.
The elections for parliament’s lower house, which was dissolved earlier last year on a court order, are to be announced within 60 days of the ratification of the constitution. Officials have said they hope to have a new parliament seated in the summer, with the lower house recovering legislative authority that has been temporarily handed over to the upper chamber with the passage of the constitution.
The April 6 youth movement, which had initially supported Mursi for the presidency, rejected renewed calls to work with the revised government. The group had wanted to see a more sweeping reshuffle, and said the new changes now boosted the portfolios held by the Brotherhood’s political arm, the Freedom and Justice Party, to at least seven.
“How can we stand by a government whose political and economic policies contradict our principles,” Mohamed Adel, a co-founder of the group, said in an emailed statement. He described the government’s policies as leading Egypt into “an economic abyss.”
The drop in foreign reserves is a sign of the problems confronting the Arab world’s most populous nation. In a bid to stem the decline, the central bank began dollar auctions last week, a move that saw the Egyptian pound weaken by more than 3 percent against the U.S. currency. The bank sold $60 million today, with the Egyptian currency extending its slide to a record of 6.4518 to the dollar.
The sales reflect the regulator’s inability to defend the currency as it did before and highlights the importance of securing a $4.8 billion loan from the IMF, Raza Agha, chief regional economist with VTB Capital Plc in London, said in an e-mailed note.
“Egypt urgently needs donor support,” Agha said. Without it, the pound “is extremely vulnerable” and the central bank cannot continue to auction such amounts daily “given its precarious level of usable reserves.”
Hegazi said in an interview today before being sworn in that Egypt was ready to resume talks with the IMF.
Still, the government faces the challenge of showing a commitment to reform while trying to ensure that those measures do not further anger Egyptians.
The changes in the Cabinet, which include the addition of at least two people linked to the Muslim Brotherhood organization that fielded Mursi for the presidency, may factor prominently into how well the Islamists fare in the parliamentary race, Ashour said.
The local development and supply ministers are both linked to the Brotherhood or its political party, which may capitalize on the group’s traditional strength of working at grassroots level.
In addition, the replacement of the interior minister with someone who hails from the ministry’s prisons department, often seen as the bottom tier, reflects anger at the security forces’ inability to protect the Brotherhood headquarters from attack during the showdown between Islamists and secularists over the constitution, Ashour said.
The opposition, comprising secularists, members of the Christian minority and youth activists, has rejected calls for talks. Some groups have set Jan. 25, the second anniversary of the start of the uprising, as a date to overturn the new charter.
The tensions surrounding the constitution, which was passed in a two-stage referendum with almost 64 percent backing it last month, was a factor in the decision by the government to delay the IMF loan, for which Egypt had signed a preliminary deal.
The IMF’s Ahmed is to discuss with the Egyptian government “the most recent economic developments, their policy plans for addressing Egypt’s economic and financial challenges, and possible IMF support for Egypt in facing these challenges,” the organization said in a statement yesterday.
“Fiscal measures, and particularly those that reduce subsidies or increase taxes, will be very difficult to implement prior to the February 2013 lower house elections,” Agha wrote. “The latter is all the more true given reports that the Muslim Brotherhood (and its political arm, the Freedom and Justice Party) has seen its support base weaken” since Mursi’s election in June.
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