More insight in economic developments past decades ...

Economic Reform In Egypt In A Changing Global Economy - 1997 [pdf]

By the early 1980s, the Egyptian economy already largely depended on oil export revenues, Suez Canal dues and remittances from Egyptians working abroad to pay for imports of food and capital goods (see Table 2). Substantial investments were meanwhile made in highly capital-intensive industries, which obviously did not ease unemployment. The fall in oil prices in the mid- 1980s cut oil revenues and remittances and worked its way through the economy.

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Egypt's participation on the Western side in the Gulf War in 1990-91 led to vast transfers of funds from Western and Arab donors and the promise of debt relief. The latter was conditional on the IMF's certification that Egypt had sound policies leading towards macroeconomic stabilisation. In turn, the IMF required Egypt to adopt a comprehensive economic and structural adjustment programme which, irrespective of the government's enthusiasm, led to economic progress. The Paris Club agreement has been part of Egypt's international economic relations since 1991.

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Egypt's balance of payments on current account (Table 2) brings out its structural trade deficit, which averaged $6.2 billion a year from 1990-95 and shows no sign of falling. This is partly made up for by income from invisible transactions, mainly workers' remittances, tourism receipts and Suez Canal dues. In 1990-94, workers' remittances averaged $4.8 billion a year and receipts from tourism $1.7 billion.

In a typical year, Egypt's exports of petroleum and gas, tourism, official transfers, Suez Canal dues and workers' remittances add up to between a fifth and a quarter of GNP. These receipts are a sort of economic rent, deriving from Egypt's geological, historical and strategic situation. They are only partly influenced by domestic economic policies and tend to be volatile.

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The policy of the European Community (later the European Union) towards Egypt has been typical of its policy towards non-member Mediterranean states. A trade agreement has given preferential treatment to Egypt's exports, while financial protocols have helped finance improvement in the country's supply capacity. The co-operation agreement of January 1977, which was updated as the European Community grew bigger, provides for broad co-operation and, being of indefinite duration, established a stable contractual framework for long-term programming decisions. Four successive financial protocols to the agreement covered the period 1977-96.