Egypt: Time for action
Egypt has weathered the economic storms of the past two years and looks set for steady growth over the next decade. But tough decisions must be taken on the exchange rate and privatization if the country is to achieve its long-term potential.
Over the past seven years, Egypt has been one of the fastest-growing and most reliable economies in the Middle East and north Africa.
Since 1994, GDP has expanded by 5% each year, inflation has fallen to 3% and the budget deficit has been kept below 4% of GDP. Exports have been weak but the resulting trade deficit has never been large enough to cause balance of payments or current account problems.
Whether or not Egypt can maintain this impressive performance however is now a matter of some debate.
Hany Dimian, a senior advisor to the minister of the economy, Youssef Boutros Ghali, is certainly confident. "Macroeconomic fundamentals are improving in all areas," he says. "I expect GDP to increase by 5.2% this year and 6.5% in 2002." Dimian maintains that the Egyptian pound, which was devalued from 3.4 to the US dollar to 3.85 in January 2001, is now stable, and that inflation and the budget deficit will continue at their low levels. He also believes that the liquidity squeeze - which has paralysed the domestic economy since 1999 - is over thanks to the government's decision last June to start paying back the E£22 billion ($5.7