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The Egyptian Economy

The Egyptian Economy: Current Challenges and Future Prospects

Edited by Hanaa Kheir-El-Din
Copyright Date: 2008
Pages: 352
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  • Book Info
    The Egyptian Economy
    Book Description:

    The Egyptian economy has undergone several reforms since the early 1990s. However, it was not until recently that the reform process picked up speed and intensity. Key initiatives included shifting to a flexible exchange rate regime, liberalizing trade, revising and reducing the tariff structure, and improving the income tax system. Plans are underway to restructure the financial sector and privatize most state-owned enterprises. This volume aims to evaluate the impact of recent reform policies and highlight priority areas for further reform at the macroeconomic and institutional levels. Topics addressed include growth, distribution, and poverty reduction; monetary policy and the impact of exchange rate liberalization; unemployment and job creation; and the new pension system. The objective is to contribute to ongoing efforts to stimulate growth and employment, ensure fiscal sustainability, improve the external sector, and address issues related to poverty and income distribution. The volume focuses on the health and energy sectors in Egypt, with the aim of assessing each sector in three areas: financing, organization, and policy management, in order to suggest ideas for reform in light of international experience. Contributors: Ragui Assaad, Omneia Helmy, Abdallah Shehata Khattab, Hanaa Kheir-El-Din, Aart Kraay, Heba El-Laithy, Nihal El-Megharbel, Mai El Mossallamy, Tarek Abdelfattah Moursi, Sarah El Nashar, Tarek Selim, Enas Zakareya.

    eISBN: 978-1-61797-525-7
    Subjects: Business

Table of Contents

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  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Foreword
    (pp. ix-x)
    Osman M. Osman

    I would like to thank the Egyptian Center for Economic Studies (ECES) for a topic well chosen. Its importance lies in its assessment of key reforms undertaken in recent years and its discussion of reform prospects in areas such as macroeconomic, institutional, and sectoral reforms. Thus, it contributes to the formulation of long-term development policies. This volume, based on a conference held by ECES in November 2006, also comes at a time when the Egyptian economy is facing several challenges of which five stand out. The first—as elaborated in chapter two of this volume—relates to the challenge of...

  4. Acknowledgments
    (pp. xi-xii)
    Hanaa Kheir-El-Din
  5. Contributors
    (pp. xiii-xiv)
  6. CHAPTER 1 Overview
    (pp. 1-10)
    Hanaa Kheir-El-Din

    The Egyptian economy has undergone several reforms since the early 1990s. However, it was not until mid-2004 that the reform process picked up in speed and intensity. Key initiatives involved rationalizing the tariff structure, stabilizing the exchange rate, and improving the income tax system, which included drastic cuts in income tax rates and a streamlining of tax administration. As a result, the real GDP growth rate increased, inflation fell sharply, and the real interest rate turned positive, in turn during 2005, building economic confidence.

    Although such developments reflected positively on the economy, considerable challenges still lie ahead. Output growth, though...

  7. PART I: Macroeconomy

    • CHAPTER 2 An Assessment of Growth, Distribution, and Poverty in Egypt: 1990/91–2004/05
      (pp. 13-52)
      Hanaa Kheir-El-Din and Heba El-Laithy

      A prime goal of development efforts is to reduce poverty; to fulfill that goal requires strong, country-specific combinations of growth and distribution policies (Bourguignon 2005). Countries that have combined rapid growth with improved income distribution have reduced poverty the fastest. It has been pointed out that the “quantity and quality of employment of the poor” is a crucial factor in determining how growth would translate into higher income for the poor (Osmani 2003, as quoted in El-Laithy and El Ehwany forthcoming). However, when policies aimed at equity have had a negative effect on growth, the poverty reduction impact has been...

    • CHAPTER 3 The Effect of Some Recent Changes in Egyptian Monetary Policy: Measurement and Evaluation
      (pp. 53-100)
      Tarek Abdelfattah Moursi, Mai El Mossallamy and Enas Zakareya

      Since the beginning of the 1990s through 2005, frequent changes have occurred in the conduct and management of monetary policy in Egypt. The changes have been implemented as part of the reform endeavors by the government and the Central Bank of Egypt (CBE) to stimulate the short-term growth of the real economy. They involved modifications to the operational and intermediate targets of the CBE as well as in the choice of monetary instruments selected to achieve the operating targets. Nevertheless, the principal objectives of monetary policy remained more or less unchanged throughout almost all of that period, focusing essentially on...

    • CHAPTER 4 The Welfare Effects of a Large Depreciation: The Case of Egypt 2000–2005
      (pp. 101-130)
      Aart Kraay

      Between 2000 and 2005 Egypt experienced a large nominal depreciation of the Egyptian pound, much of it concentrated around a sharp decline in early 2003. The objective of this paper is to assess the welfare implications of the large changes in consumer prices that accompanied this movement in the exchange rate. To address this issue I first isolate the component of observed price changes during this period that are due to the depreciation. I do this by estimating disaggregated exchange rate pass-through regressions, using monthly consumer price index (CPI) data over the period July 2000 through June 2005, for eight...

  8. PART II: Labor Market Issues

    • CHAPTER 5 Unemployment and Youth Insertion in the Labor Market in Egypt
      (pp. 133-178)
      Ragui Assaad

      It is well-established by now that the unemployment problem in Egypt is essentially one relating to the labor market insertion of a growing and increasingly educated youth population. The vast majority of the unemployed are under the age of 30, educated at least up to the intermediate level, and have never worked before. An analysis of the dynamics of unemployment in Egypt must, therefore, focus on the process of labor market entry and examine the demographic, economic, and institutional factors that shape this process.

      Using data from the recently released Egypt Labor Market Panel Survey (ELMPS) of 2006, the study...

    • CHAPTER 6 The Impact of Recent Macro and Labor Market Policies on Job Creation in Egypt
      (pp. 179-200)
      Nihal El-Megharbel

      There is growing consensus that job creation poses a major challenge for the Egyptian economy. Some 750,000 new jobs need to be created annually to absorb new entrants to the labor market and reduce the annual unemployment rate currently estimated at 11 percent (CAPMAS 2006b). The labor market suffers from a demand-supply mismatch as well as a discrepancy between the outcome of the education system and skill requirements of businesses. Meanwhile, the government remains a major source of non-agricultural employment, as the private sector has fallen short of creating enough jobs to absorb the growing labor force. In addition, the...

    • CHAPTER 7 Toward a More Efficient and Equitable Pension System in Egypt
      (pp. 201-232)
      Omneia Helmy

      The Egyptian government has recently been engaged in developing a new pension system based on a unified law. The new system aims to provide a decent pension for the elderly; achieve social security for individuals with no pension; and encourage participant employees to target their own pension by changing the methods of defining individual pensions, funding accrued pensions, and managing pension funds.

      This new approach has been developed to address the current pension system’s inability to achieve fiscal sustainability. The liabilities of the current system are estimated at approximately 141 percent of GDP as opposed to 48 percent in reserves....

  9. PART III: Sectoral Issues

    • CHAPTER 8 On Efficient Utilization of Egypt’s Energy Resources: Oil and Natural Gas
      (pp. 235-262)
      Tarek H. Selim

      Energy is a prime source of livelihood for many nations and is a cause of affluence for others. In Egypt, energy constitutes one fifth of the country’s overall economic activity, a little less than half of the country’s export revenues, and is a strategic resource for future growth. Yet Egypt’s energy reserves are quickly depletable, with a risk of over-consumption, production is aging as far as oil is concerned, and at the same time energy reserves are rather new with respect to natural gas. Hence, there are future tradeoffs between oil and natural gas in the Egyptian economy. Specifically, oil...

    • CHAPTER 9 The Impact of Reducing Energy Subsidies on Energy Intensive Industries in Egypt
      (pp. 263-300)
      Abdallah Shehata Khattab

      Subsidies are a major item in government expenditures in Egypt. Recent figures indicate that these subsidies exceeded 23 percent of total budget spending in 2005/2006 (more than LE 50 billion), around 74 percent of which was allocated to energy products (excluding electricity).

      Due to the rapid increase in oil prices over the past two years,¹ the subsidy bill of energy products has quadrupled. Such increase has posed a critical challenge for the fiscal authority in Egypt. Political and economic considerations have restrained the government from restructuring the existing subsidy system despite its inefficiencies. Starting FY 2005/2006, the fiscal authority has...

    • CHAPTER 10 Public Expenditure on Health in Egypt
      (pp. 301-330)
      Akiko Maeda and Sameh El Saharty

      Over the past decade, Egypt has achieved an overall improvement in health outcomes. There have been significant reductions in infant, child, and maternal mortality rates. Infant mortality decreased from 76 (per 1000 live births) in 1992 to 33 in 2003; and maternal mortality decreased from 170 (per 1000 live births) in 1992 to 39 in 2003. These health improvements are probably attributable to a combination of factors, including improved access to basic health services, hygiene, and safe drinking water, and higher educational attainment of mothers. However, several critical deficiencies remain in the public health system in Egypt, fueling concerns about...

  10. Index
    (pp. 331-338)