In the year 2003, the growth rate of the economy of Egypt was only 3 percent. This implied that the country did not perform as per its capabilities. The other factors, which plagued the economy during that period was rise in unemployment, rate of inflation being high and private investment being sluggish.
There were some challenges of economic reform in Egypt.
Inflation: Inflation indicator in Egypt, the wholesale price index or WPI showed that over the previous years inflation was gradually catching up. The rate of inflation in the year 2004 was 21.7 percent. Inflation posed to be one of the challenges of economic reform in Egypt.
Unemployment: Rate of unemployment increased from 9 percent in the year 2002 to 10 percent in the year 2003. Egyptians dwelling below the poverty line decreased to 23 percent in the year 1995 to 1996 from 25 percent in the year 1990 to 1991.It was a saddening state of affairs that despite the existence of economic reform in the country, the government failed to restructure the same for getting better results. There were yet other factors, which indicated that the economy was not very robust during that period.
Fiscal deficit: The fiscal deficit recorded was 6 percent of the gross domestic product or the GDP in the year 2002 to 2003. As per records of the International Monetary Fund or the IMF, fiscal deficit in the year 2003-2004, was 2.5 percent of gross domestic product.
Export activities in Egypt: In the year 2004, economy of Egypt was closed. The value of exports during that period was USD$8 billion. However, the contribution to the gross domestic product was only 100 percent. There was export of textiles, petroleum products, garments, cotton yarns, agricultural products. But all these accounted only 1/3rd of the total exports. During the same year it was found out that import value was twice that of exports. Import activities were funded by revenues earned from remittances of the workers and from the tourism industry.
Exchange rates: Egypt had a floating exchange rate during 2003. The main drawback of the exchange rate in Egypt was that the exchange rates were not governed by monetary policies. The rates of interest, exchange rates, accounting of the reserves were all kept from being divulged and were mostly governed by methods, which were not at all transparent.
Public sector control: The public sector showed its prominence in some areas. Many commercial banks were owned by the financial sector. The main essence of the banking sector in Egypt, particularly, the public banks served as creditors, lending money to the Egyptian government.
Public debt in Egypt:
The public debt recorded was approximately 100 percent of the gross domestic product or the GDP. To add to the troubles, there were plenty of off budget expenditure as well as different liabilities.
Overcoming the challenges of economic reform in Egypt, could be brought about by adopting reforms, which would address to the needs of the economy and respond accordingly. Challenges of economic reform in Egypt can be tackled by introducing alterations in structural reforms. Structural reforms pertaining to privatization, trade and financial sector need to be effected in the country. In all other aspects, condition of Egypt is quite favorable. The country can boast of a strong infrastructure of communications, power and transport. Natural resources in the country is also strong. With regard to its location, the country is located in an advantageous position, with the European markets in close vicinity. The country’s economy could perform to its full potential with the implementation of reforms in selected areas.
Last Updated on : 26th June 2013