Following is the transcript of an interview with Amr El-Garhy, Egypt's Minister of Finance at the Asian Infrastructure Investment Bank's second annual meeting in Jeju, South Korea. The discussion was broadcast on CNBC on 16 June 2017.
All references must be sourced to CNBC.
Interviewed by Martin Soong, Anchor, CNBC.
Martin Soong (MS): We will get to Egypt's interest in, and possible involvement in, Asian infrastructure development a little bit later on, but we're obliged to start, I think, with the issue with Qatar and the isolation that it is currently facing. We had the opportunity earlier on to talk to Qatar's Finance Minister. We have that soundbite, if we could play that and then after that get your comments.
So, very pointed there, Minister. Qatar's Finance Minister saying, and the line that I quote is, 'if we lose a dollar, they will lose a dollar. 'They' meaning the Gulf states that are isolating Qatar, including Egypt. What would be your response to that?
Amr El-Garhy: It's not a matter of losing a dollar, it's a matter of principle, actually. If you have a number of countries, neighboring countries, brother countries, having this systemic issue, maybe there's something wrong that needs to be tackled here. So it's not a matter of loss of money because the result of what's happening and the negative consequences of it is much more expensive to those countries rather than, again, us losing a dollar - we'll lose the dollar. This is not the way I would think about it. It's a matter of principle, it's a matter of - it's what is happening, really happening. Our country supporting tourism, or supporting things, again, in those countries, in a way that can unsettle them. This is the real story - Egypt and the other countries, Saudi Arabia, United Arab Emirates and Bahrain are very reasonable and very rational countries as well. They were living together as brothers and as associates for a very long time. So, when four countries like this go this way, there must be a very strong reason to do that and the other party has to be very attentive and very careful about his response to this.
MS: Minister, recap for us if you could. You mention Qatar's support of and for terrorism. Is that the fundamental reason that Egypt is part of this coalition of Gulf states, which has diplomatically cut off Qatar and is isolating it?
Amr El-Garhy: Egypt is taking the stand because Egypt has been calling for a fight on terror and fight on countries that could be supporting terror as well. So Egypt's stand is clear, has been announced, has been said clearly many times by the President and by the Egyptian administration as well. So it's a very clear stand, it is not against a single country, it's against whatever country that does this actually. So it's very important for us to be very vigilant and very accurate about what's happening in this area of operation.
MS: And Minister, Egypt believes that Turkey now falls under that same rubric, because it is now calling for Turkey to be part of - together with Qatar - to be isolated by the group.
Amr El-Garhy: No, I'm not extending my talk about that for now, we're talking about…
MS: This is what your President, el-Sisi, is calling for.
Amr El-Garhy: Yes, yes, but for now we're talking about the Arab countries and their stand with Qatar, and I think we'll have to limit our dialogue to this for now. So I believe what we need to work on is the position between the Arab countries and Qatar for the moment.
MS: Okay let's look at the reverse side. There was a decision just very recently by Egypt to allow non-Egyptian or Qatari-registered aircraft to fly to and from Qatar through your airspace. Would you consider that a softening of your position on this issue?
Amr El-Garhy: Would you repeat that again?
MS: So there's been a recent decision by Egypt to allow aircraft, except for those that are registered in Egypt or in Qatar, to fly to and from Qatar through Egyptian airspace. Would that constitute a softening of Egypt's position on Qatar?
Amr El-Garhy: Well, maybe this happened quite recently, I'm not entirely aware of it. But I believe Egypt's position is clear in association with other countries and I think the four countries will take the stand together and will decide together what needs to be done in the coming future.
MS: Okay. Minister, let's talk about the state of Egypt's economy right now. Tourism is very important for your country, I know. It has been depressed, or it's suffered, partly due to a drop in travelers from Russia and also the UK. Are conditions getting better, though?
Amr El-Garhy: It is improving, year-on-year in comparison to the last year, it's improving. It's definitely nowhere near what we were in 2010, but it is improving. The strongest hit we took in 2015, post the plane crash that happened over Sinai, but we're recovering from that. Definitely, the decision by the Russian and the British, have affected us a great deal in 2016. We hope that they come back from this decision very soon because this would be very supportive to us and especially that we have abided by all the requirements and we've fulfilled all their requirements in terms of security in the airports and so on. So, we believe that in the coming period, we will see tourism coming back in a stronger way.
MS: And Minister, in terms of broader support for Egypt's economy, you are days away from receiving the second tranche of IMF money, $1.25 billion. Do you have a more exact date on that - when you will receive the funds?
Amr El-Garhy: Not an exact date, it will depend on when the board of the IMF will convene. We believe it will convene very soon. So we're talking, I mean, very, very few weeks from now.
MS: And a conditionality attached to the money, obviously we know the IMF is quite insistent that Egypt tackles its inflation problem, brings inflation down, as well as within three years - or by three years - to eliminate subsidies on energy. How committed is the el-Sisi administration, how committed are you as Finance Minister, to make that happen?
Amr El-Garhy: We're very committed to both because this will put us on the right track in terms of the health of the economy. Inflation is a very important challenge and it is a 'very soon' challenge, it is an imminent challenge that we have to work on. We have to bring it back to where it was, it was a single digit. And to a single digit, to early 'teens' in terms of 12 to 13 percent, and this is what the central bank announced, that some time in 2018, we'll be at 13 percent inflation in comparison to today's 30 percent. So, we'll have to take this down very quickly. Also in terms of subsidy, it's very important for us to handle this issue because it has been hampering Egypt for a very long time. So, it's very important for us to restructure our subsidy to make sure that subsidy is going to people who deserve it, and not to give absolute subsidy to everyone - those who deserve it and those who don't. That's very important.
MS: So at the end of the three-year mark there will be zero subsidies on energy in Egypt?
Amr El-Garhy: Not on the entire energy. On parts of the energy sector, not all of it. In other sectors, some sectors will take five years, some sectors will take three years, but we're committed to that as well.