PIMCO CEO Mohammed El-Erian spoke to Bloomberg Television on Thursday about the economic future of Egypt, a day before a chaotic turn of events that led to Vice President Omar Suleiman announcing Friday that President Hosni Mubarak had left the capital for his resort home in Sharm el-Sheik and stepped down, relinquishing full control to a council of military leaders.
El-Erian said Thursday that Suleiman could lead the political process, given his military background: “The one credible institution in Egypt is the army. The army can define the parameters of this transition as long as it is viewed as a means to another end, which is greater democracy and greater freedom.”
El-Erian, who speaks Arabic and is the son of an Egyptian diplomat, was interviewed in London, saying that it’s time to focus on the economic and financial situation in Egypt, not only the political dynamics. “We should also be thinking about what it takes to restart an economy that has been dramatically stopped in its tracks by the events of the last few weeks."
In terms of the political situation, Suleiman will need to lead a transition that can “deliver three things: One, a time table for parliamentary elections that are fair and free, second, constitutional reform, third, presidential elections. What is critical over the next few days is to deliver a transition process that is credible to most Egyptians."
While the situation may look chaotic to outsiders, the administration is listening to the nation's elite, El-Erian (left) says. "I can tell you there are many conversations going on right now, and there's a desire to avoid chaos … Everybody is hoping for managed change and the critical thing is to converge on a common understanding of what this managed change looks like."
The PIMCO executive believes that the United States should “be there to support the transition process towards more democracy and more freedom … and to recognize that the Egyptian economy is going to need help in restarting -- everything from Central Bank swap lines to redirecting aid.
“It is critical that once the political process is clearer, that we can restart this economy in order to deliver, especially to the poor segments of the population who are at risk right now," El-Erian explained.
He remains bullish on the Egyptian economy, saying, "Over time, it is a self-sustaining economy that has lots of strength."
However, “In the immediate few weeks and months when they are restarting this economy, there will be a need to calm sentiment,” he added. “The one thing I worry about is a certain amount of capital outflow, especially when the stock market is reopened, which is currently scheduled for next Sunday."