Mubarak: Egypt faces austerity, not prosperity

President Hosni Mubarak is making no effort to conceal from the Egyptian public the formidable obstacles he faces in trying to improve the lot of citizens here.

Thus, in contrast to Anwar Sadat, who often painted a rosy picture of the economy and promised Egyptians prosperity after the completion of Israel's pullout from Sinai next month, President Mubarak prefers to be frank.

Reversing Mr. Sadat's peace-equals-prosperity argument, he said recently, ''The end of the occupation is not the end of our economic problems. . . . We should not expect the completion of the withdrawal to produce prosperity.''

At a recent session of parliament, he mentioned some of the problems his government will have to face. These include less revenue from oil exports and tourism, a slackening inflow of capital from Egyptians working abroad, and disappointingly low revenues from the Suez Canal.

His grim outlook is apparently based on views of a group of veteran economists he invited to map out a strategy for curing Egypt's economic ills in February.

The conference - which included a kaleidoscope of present and former officials, university professors, and representatives of the political parties - has not come up with a quick economic cure-all. Instead it wound up presenting a report with recommendations prepared by a select group of five, with the understanding that the group will reconvene in May.

The committee of five has suggested a new five-year plan that would emphasize self-reliance and central planning as a means for reducing dependence on foreign capital to finance public projects. According to a central bank report, foreign financing of government projects has reached 90 percent.

But the committee has adopted a conservative attitude toward ways of relieving some of the burdens contributing to a mounting (STR)18 billion ($23.4 billion) foreign debt. These burdens include:

* Subsidies. Since the early 1960s the government followed a policy of subsidizing a number of goods in an effort to redistribute income. The list of goods lengthened over the years to include bread, oil, soap, cotton fabric, meat , petroleum products such as gasoline, and public transportation. Such subsidies cost the government (STR)2 billion ($2.6 billion) last year.

Apparently bearing in mind the 1977 food riots, the government has refrained from reducing subsidies, and it often assures Egyptians these subsidies will not be touched.

* Defense. Although a lone voice in the conference called for slashing defense spending (taking up about 26 percent of the budget) to channel more funds to development, the consensus was that Egypt's role in the Arab world prevents this.

* Red tape. The government's policy of hiring all graduates adds to an already overgrown bureaucracy and is largely responsible for the losses of the public sector.

The committee followed the tradition of calling on the government to employ 400,000 graduates this year -- and it suggested a doubling of investments in the next budget to create more jobs for them.