Pimco's El-Erian Comments on Egypt's Challenges
CNBC Executive News Editor
Pimco CEO Mohamed El-Erian shared his commentary on Egypt and the challenges that country faces restarting its economy as its future remains uncertain.
El-Erian laid out these factors:
"Three factors stand out in a process that is critical for the longer-term well-being of the country, including the millions of Egyptians that are protesting for greater freedoms.
First, Egypt’s banking system must resume normal operations in an orderly fashion. A very good start was made on Sunday to bring part of the system back on line, and important challenges remain.
The central bank has no choice but to flood the financial system with both domestic and dollar liquidity. And both the central bank and the commercial banks must continue to avoid the temptation to overly curtail deposit withdrawals lest that, in itself, fuel a deposit run.
Second, the Finance Ministry must deal properly with the unanticipated collapse in tax revenues. It must make sure that this temporary interruption in government receipts does not lead to even more destabilizing spending disruptions. Salaries must be paid promptly, and all supplier bills must be met.
Third, particular emphasis must be placed on targeted social spending, particularly when it comes to health, food subsidies, and shelter. Remember, Egypt’s poor are extremely vulnerable to the current economic and financial dislocations."
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