The state’s lack of dependence on hot money and the stimulation of direct investment .. A correct direction to increase national income

Books – Mustafa Khaled:

Economists and bankers appreciated the state’s tendency not to rely on hot money, maximize the national industry and stimulate direct investment that increases national income

They stressed that the Egyptian economy is strong and stable and can dispense with hot money that does not represent a real investment, and can not be relied upon in building the economy and achieving real growth rates, especially after the state s strong interest in maximizing national industry and agriculture.

The economic expert, dr. Mohammed Rashid, a teacher at the Faculty of Politics and Economics, Beni Suef University, said the state’s decision not to rely on hot money to bridge the foreign exchange resource gap was one of the best economic decisions, as The Central Bank’s swing of the Egyptian pound exchange rate in late 2016 required some hot money to be attracted.Until exchange rate stability was achieved, and that this procedure was supposed to be a temporary measure until the economy get back on its feet, mainly on the main sources of foreign exchange represented in tourism and exports, and the reduction of the import bill by locating the industry and deepening the local product.

Rashid pointed out that just as hot money helps stabilize the foreign exchange market at certain times, it can pose a real threat to this stability at other times, as has happened recently, especially since the last quarter of 2021, which saw a massive exodus of seen hot money. of emerging markets and then increased This tone after the Russo-Ukrainian war, which was a strong motivation for the Central Bank to depreciate the value of the Egyptian pound by about 17% during the month of March.

He pointed out that hot money was a major cause of the crisis in Southeast Asian countries in 1997, and that the stock market and currency channels were a major reason for the contagion of the crisis at that time to many countries of the world. and thus abandoning hot money to balance the foreign exchange market will be a strong motive to double exports and attract foreign investment strongly Supporting economic growth rates, which is the safe way to stabilize the foreign exchange market maintain.

In turn, dr. Ramzi Al-Jam, an economist and banker, indicated that changing the state’s strategy of not relying primarily on foreign investment in government debt instruments, whether in treasury bills, bonds or shares of companies on the stock exchange to take advantage from the decline in the local currency or even deposit In the deposit certificates offered by local banks, it was a decision in the balance. Indeed, this case should have been accepted, after the 2018 crisis, in which more hot money came out very significantly, as happened in China in 2014 & 2015, causing huge losses. The Chinese economy is worth hundreds of billions of dollars.

Al-Jam stressed that the state’s dependence on foreign direct investment, especially after the creation of the environment available to attract foreign direct investment flows into promising investments, is one of the good things the state will adopt in the coming period, in view of the state’s tendency to reform essential sectors such as agriculture, manufacturing and industrial sectors Communications, information technology and renewable energy in the economic reform program in its second phase.

He pointed out that the diversification of the Egyptian economy, as one of the in-nature economies, is capable of attracting more foreign direct investment, thanks to the full development of infrastructure, as well as the President of the Republic’s tour in the sister Gulf countries, to pump more Arab investment into the economy, will lead to abandonment of investment in government debt instruments, and move strongly towards the receipt of more foreign direct investment, called real investment, in light of the appropriate economic environment to receive more investment.

In turn, dr. Haitham Jamal, an economist, explains that hot money is short-term investment due to financial flows to take advantage of a specific economic situation, which takes various forms, including investing in treasury bills or securities offered by the government for the purpose of borrowing. , and there is another form represented in investments in corporate shares. Listed on the stock exchange to take advantage of the depreciation of the local currency against the dollar

He said there were a number of risks arising from this type of speculation, the most important of which did not represent real investment and could not be relied upon to build the economy and achieve real growth rates.

And it causes tremor in the money market due to the rapid exit, and the impact on the value of the local currency due to the speculative process, which causes the central bank to raise the interest rate to ensure that these funds remain as long as possible despite the short period of their existence

He pointed out that in order to improve the economic situation, there must be real investment, the provision of incentives to support local and foreign investment, the development of local savings, the provision of real jobs, the increase in the volume of exports, the adoption of a national export strategy, the encouragement of local industrialization. and strengthening local industry to increase economic growth rates and increase the volume of GDP.

Ashraf Ghorab, economic expert and vice-president of the Arab Union for Social Development in the Arab Labor System of the League of Arab States for Economic Development, in turn said that the state’s adoption of a new strategy is aimed at not rely on hot. money coming from abroad to buy local debt instruments is a bold and important decision that came at the time, especially after the hot money crises in 2018, 2020 and 2022, the most recent of which was the last period due to the repercussions of the Russo-Ukrainian War and the US Federal Reserve raised interest rates from 0.25% to 1.75%, so that the hot money from emerging markets fled to the United States He stressed that the Egyptian economy is strong and stable and can dispense with these funds, especially after the strong interest of the state in maximizing national industry and agriculture.

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