Since the early 1990s, Egypt has instituted a dramatic economic recovery making its economy an envy of the region. GDP during the last few years has grown by between 5.3 percent and 6 percent and is expected to expand to 8 percent in the years to come.
The turnaround began in 1991 when the country, faced with large external debt service arrears, declining growth, 20 percent inflation and a worsening balance of payments, initiated a comprehensive economic reform program supported by the IMF. The program included freeing interest and exchange rates, dramatically reducing the budget deficit and disciplined monetary growth.
Egypt also received assistance from the World Bank to develop a framework for reforming the public sector, privatizing state-owned enterprises and liberalizing trade and investment policies. These reforms have led to exchange rate stabilization, lower inflation, a balance of payments surplus and a liberalized banking regime.
The government is continuing with its reform program, particularly its focus on privatization. Egypt has implemented one of the region's most aggressive programs, earning it an IMF ranking as one of the top four of emerging markets. As of March 31, 1999, Egypt had privatized 33 percent of its public-sector enterprises, generating $2.7 billion in government revenue
It is likely that these reforms will remain on track as President Mubarak, who has overseen the economic turnaround, was elected in September 1999 to a fourth six-year term. Soon after, he reshuffled his cabinet to prove his commitment to economic reform, appointing former Minister of Public Enterprises Atef Ubeid as Prime Minister.
Mubarak has also implemented measures, albeit often drastic, to control one of the biggest threats to the country's economic recovery: Islamic fundamentalism. Since the November 1997 Luxor massacre, which targeted the lucrative tourism sector in an attempt to shake the pillars of the regime, Egypt unleashed a harsh and successful campaign to combat extremists. The massacre, which virtually crippled tourism, one of the country's leading economic sectors, revealed how one sensational event could nearly erase years of progress and delay further economic growth.
Mubarak will face increasing pressure during this term to appoint a successor. This need has been highlighted with a July 1999 assassination attempt (the fourth such occurrence during Mubarak's tenure). Egypt's Constitution has no effective mechanism in place to nominate heads of state.
Maintaining internal stability will be vital for attracting the foreign investment necessary to continue the economic expansion. And this expansion is crucial if the country wants to be able to provide better living standards for its exploding population, now at nearly sixty-five million. In the last century, the population has increased almost six times and three times since 1950. Even under a moderate growth scenario, Egypt will have more than ninety million citizens by the year 2035. Under more rapid growth, as has been the case in recent years, Egypt may reach 103 million in the next forty years.
© 2000 Mena Report (www.menareport.com)