In the early nineties, the government started a comprehensive economic reform program aiming at generating sufficient and sustainable growth rates, improving the standard of living, reducing unemployment and bringing inflation rates to safe levels. The program has successfully achieved macroeconomic stability. Central to this success were three elements: a major fiscal adjustment, exchange market reform and the adoption of an exchange rate anchor and a supportive monetary system.
The reform arrangements coupled with massive external debt relief, helped Egypt improve its macroeconomic performance during the 1990s. Although the pace of structural reforms such as privatization and new business legislation has been slower than expected, Egypt s steps toward a more market- oriented economy have increased foreign investment and enhanced macro-economic indicators.
A fundamental policy challenge facing Egypt now is to consolidate and extend the ongoing recovery, particularly in view of increased global challenges. This will require continued strong macroeconomic policies, accelerated structural reforms and diversification of exports.
Year 2001 witnessed the implementation of a series of long-awaited measures on the economic arena. The government signed its long-negotiated Association Agreement with the EU, passed a mortgage law, successfully sold its debut sovereign Eurobond, and then devalued the currency to below black-market rates for the first time.
The medium-term goal will be to push growth rates towards 6% in order to create job opportunities and improve living standards. To meet the required increases in production and incomes, the current account deficit could increase to 2.5-3% of GDP. This entails sound macroeconomic policies and external financing, together with increasing the pace of structural reforms, including broad-based trade liberalization, privatization and financial sector reforms.
The liberalization of trade, promotion of exports and FDI as well as institutional development are key areas for enhancing Egypt s competitiveness. The agreement reached in Doha in November 2001 to launch a new trade round that addresses the concerns of developing countries will give Egypt more access to world export markets.
