UPDATE, July 24: In a surprise move, Morsi has announced water minister Hisham Qandil as his new prime minister.

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Newly inaugurated Egyptian president Mohammed Morsi is set to announce his pick for prime minister on Wednesday, which will be perhaps the single most important signal yet from the Morsi administration as to how he will govern.

Western media are speculating that it will be none other than Mohamed El-Erian, chief executive officer of Pacific Investment Management Co.  The idea that El-Erian would leave PIMCO and return to Egypt after an entire adult life spent abroad to take on an undefined role for a Muslim Brotherhood-backed president whose role is equally undefined is, to say the least, farfetched.  Even El-Erian himself appears to have denied the reports.

In contrast, several Egypt-based news sources seem almost certain that the new prime minister will be former Central Bank of Egypt president Mahmoud Abul-Eyoun (shown above), who served as the CBE president from 2001 to 2003 and served as CEO of the Kuwait International Bank until December 2011.

If not Abul-Eyoun, sources have indicated that the prime minister will come from among three additional possibilities, each of whom is an economist: Farouq al-Oqda, the current governor of the Central Bank of Egypt since 2003; Hazem al-Biblawy, a former finance minister; or Osama Saleh, head of the General Authority for Investment.

Those reports make a lot of sense to me:

• Morsi is not an economist, but the biggest challenge for his administration will be to boost Egypt’s sclerotic economy — international reserves have plummeted by half and borrowing costs have risen 50% since Hosni Mubarak was toppled in Febraury 2011 after three decades in power.  Unemployment is high, especially among the young, and GDP growth is expected to slow from an already tepid 2.5% in 2011 to just 1.5% this year.
• Morsi has stated  that he wants to appoint a cabinet gradually, so as to ensure the seamless nature of the transition.
• If he appoints a Muslim Brotherhood member or an Islamist, it will be instantly divisive , drawing mistrust from Coptic Christians, secularists and liberals, to say nothing of SCAF, the military and the so-called ‘deep state’ elements that remain entrenched in the fabric of Egyptian political power.
• As the former parliamentary leader of the Freedom and Justice Party, the Brotherhood’s political arm, however, Morsi will not want to appoint a prime minister deemed too unacceptable to the Brotherhood.
• If he appoints someone too close to SCAF or Hosni Mubarak’s old regime, he’ll draw criticism from Islamists and secularists alike.
• If he appoints someone too famous (like El-Erian or other well-known figures), he could also risk being overshadowed or outmaneuvered — after all, Morsi’s image in Egypt is of a “spare tire” who was only the Brotherhood’s last-minute choice for the presidency.

So among those four options, Abul-Eyoun seems the most likely.  The 75-year-old al-Biblawy served as finance minister recently under the transitional SCAF government, but tried to resign after clases between police and Coptic Christians in October 2011.  Morsi may also prefer to keep al-Oqda and Saleh in their current roles, so as not to disrupt Egypt’s economy any further.

That hasn’t stopped rumors like the El-Erian one, nor has it stopped speculation that Mohamed ElBaradei, former head of the International Atomic Energy Agency, might be appointed prime minister, or that the Muslim Brotherhood would prefer Khairat al-Shater, a businessman who was the Muslim Brotherhood’s first choice for the presidential race, until his disqualification in May.

But al-Shater, a leader of the conservative wing of the Brotherhood, is already viewed as the Brotherhood’s behind-the-scenes power broker — his appointment would only validate those fears, and likely spark signficant resistance from SCAF and from secular Egyptians and Copts.  And ElBaradei, a world-known figure respected abroad who has criticized both SCAF and the Brotherhood and who pulled out of the presidential race last year in protest of the transition, seems even more unlikely — in any event, Brotherhood sources have indicated they do not consider him an acceptable choice.

It’s been a dizzying three weeks for Morsi — he’s met with U.S. Secretary of State Hillary Clinton in Cairo, he’s made his first visit abroad (notably, to Saudi Arabia), and he’s picked fights with the Supreme Council of the Armed Forces as to whether SCAF can amend the interim constitution and whether the dissolution of the parliament was legal (its dissolution was announced by SCAF just days before the presidential election after the Supreme Constitution Court ruled the election of a third of itts members unconstitutional).

But it’s clear that Morsi is walking a fine line — one day, he is praising the military and outgoing SCAF-appointed interim prime minister Kamal al-Ganzouri; the next day, he is announcing that he will reconvene parliament in defiance of SCAF.

Now, he seems to be awaiting the latest in what seems like an endless number of court decisions — Egypt’s Administrative Court will also announce tomorrow its ruling as to the dissolution of parliament and the legality of the Constituent Assembly — the group that will be responsible for drafting a permanent Egyptian constitution, designated right before parliament’s dissolution to be comprised one-half of Islamists, one-half non-Islamists.

With so much at stake in the ongoing political tussles among Morsi, the military and the courts that will undoubtedly be a distraction for Morsi in the months to come, it seems even more likely that he will want to appoint a low-profile technocratic as an economic Mr. Fix-It as prime minister.  Egyptian politics have been full of twists and turns in the past year and a half, but it seems very likely to me that Morsi will announce Abul-Eyoun.