Report No. 6195-EGT

Arab Republic of EgyptCurrent Economic Situation andEconomic Reform Program

October 22,1986

EuropJe, Middle East and North Africa Region

FOR OFFICIAL USE ONLY

Document of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may not otherwisebe disclosed without World Bank authorization.

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ARAB REPUBLIC OF EGYPT

Currency

Egyptian pound (LE) trade figures have beenconverted into dollars by using the followingexchange rates:

1974 - 1975: 1.00 LE = 2.56 US $1976 : 1.00 LE = 2.21 US $1977 : 1.00 LE = 2.07 US $1978 : 1.00 LE = 1.85 US $1979 : 1.00 LE = 1.43 US $1980/81 : 1.00 LE = 1.35 US $1981/82 : 1.00 LE = 1.23 US $1982/83 : 1.00 LE = 1.16 US $1983/84 : 1.00 LE = 1.08 US $1984/85 : 1.00 LE = 0.93 US $

Fiscal Year

July 1 to June 30

Abbreviations

Insignificant

Nil

N.A. Not available

CAPMAS Central Agency for Public Mobilizationand Statistics

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Table 2.5: GROSS FIXED INIVESTMENT AT CURRENT PRICES(In millions of Eavntian Pounds)

E S T I M A T E D1974 1975 1976 1977 1978 1979 1980/81 1981/82 1982/A13 1983/84 1984/85

Commodity Sectors 390 633 847 1136 1587 2275 2869 3559 3774 4370 4911

Agri cultur 54- 9 4 98 1746 1WF WS8 374 V2 5WO 689 77i Industry & Nining 192 287 379 561 765 1010 121S 1483 1313 1543 1716

Potroleum 1/ 74 122 186 206 201 448 594 752 906 979 1202Electricity & Public

Utilities 59 99 104 175 298 399 557 700 819 966 996Construction 11 31 80 48 132 160 129 152 156 193 218

Distribution Sectors 198 399 399 473 729 974 1060 1360 1998 2032 2162

Trans., Com.,& Storage 2/ 190 384 373 443 692 904 964 1119 17M 1761 1844

Suea Canat (0) (58) (71) (102) (305) (270) (200) (157) (84) (107) (125)Trade ad Finance 8 1S 26 30 37 70 96 241 220 271 318

Service Sectors 97 250 225 264 368 514 773 1028 1141 1381 1645

Housing 53 177 128 126 156 221 450 581 675 806 1001Other Service 44 73 97 138 212 293 323 447 466 575 644

Gross Fixed Investment 685 1282 1471 1873 2685 3763 4702 5947 6913 7783 8718

Less: Expenditures for thePurchase of Land 5 17 21 35 47 58 52 64 0 0 0

Investment Expenditure 680 1265 1450 1838 2638 3705 4650 5883 6913 7783 8718

Public Sector 578 852 966 1477 2191 2803 3270 4196 4900 5404 6400Private Sector 102 413 484 361 447 902 1380 1687 2013 2379 2318

meno:Foreign Investment 34 88 182 204 218 497 620 718 830 835 1037

Oil Conpanies i2 81 is5 i31 13m 371 482 568 644 698 876Law 43 Companies 2 7 27 49 82 126 138 150 186 137 161

Source: Ministry of Plonming and ISRD staff estimates.

1/ Exploration and production by foreign end donestic companies.2/ Includes Suez.3/ ISRD estimates for private inmestment.

Table of Contents

Page No.

COUNTRY DATAMAP

SUMMARY OF CONCLUSIONS ................... ... ........... ... .........-iii

I. CURRENT SITUATION ............ ** ........* . * 4. .4 ...... 1

A. Introduction .. .. ... . . .... ... ..................1

B. External Situation ....... .............. . ......... 2The Exchange System ..................................... 3The Exchange Rate ....................................... 3Foreign Exchange Earnings. ... ............... ....... . 5Imports ..***.... ....... ...................... *8Capital Account ...... ...... ... .... ... . 9External Labt .......... . .4-0 ........................ 10

C. Fiscal and Monetary Trends .............. #oo ............ 12Recent Monetary Developments .................. ..... 15

D. Sectoral Developments in Agriculture, Industryand Energy ... ... ..... ........ ..*19Agriculture .................... .................... 19Industry . ...... ............................ 27Energy .. ................ ........... . ......... 35

E. Short-Term Economic Outlook . .................... 40

II. AGENDA FOR ECONOMIC REFORM ..................................... 46

III. THE ECONOMIC OUTLOOK ........................................... 61

A. Introduction ........... . ................................ 61

B. Medium Term Scenario . .... ..................... 62Import Capacity ....................................... 62Saving, Investment and Growth . . ........................ 66Fiscal Balance and Inflation . . . 72

C. Selected Issues in the Economic Reform Program ............. 74Energy Pricing...... . . . ... . 74Reform of the Public Sectr ... 76Agricultural Pricing and Production Policies ... 77Incentives for Private Investment . . 78Stimulating Exports ..................... 79Impact on Living Standards . . 80

Statistical Appendix .. ............................................... 83

This report was prepared by a team consisting of: John Wall (Mission Chief),Sadiq Ahmed, Ajay Chhibber, Judit Gergely (Economists), Kathleen Jordan(Research Assistant) and I. Ibrahimi (Debt Specialist)

List of Text Tables

Page No.

Table 1.1 Summary Balance of Payments ............................................ . 7Table 1.2 Structure of Disbursed and Outstanding Identified

External Obligations ................................. -.............lTable 1.3 Summary of Fiscal Developments - 1981/82-1985/86 .......... 13Table 1.4 Factors Affecting Monetary Expansion .......................#16Table 1.5 Nominal and Real Domestic Interest Rates, 1976-1984/85 ...... 17Table 1.6 Indices of Agricultural Production and Yields ............... 20Table 1.7 Agricultural Procurement Prices. ............................21Table 1.8 Costs of Production and Procurement Price Changes

for Major Crops ........................................ .. . 21Table 1.9 Ratios of Domestic Farmgate and Procurement Prices

to International Farmgate Price, 1970-84 .................. 22Table 1.10 Index of Gross Agricultural Output ............Table 1.11 Relative Importance of Industry in the Egyptian Economy .....27Table 1.12 Relative Performance of the Industrial Sector ...............27lable 1.13 Share of Industrial Investment in Total Investment ..........28Table 1.14 Total Factor Productivity Analysis for Public

Industries under Ministry of Industry1973 to 1981/82 ...................... 29

Table 1.15 Measures of Static Efficiency of Public SectorIndustries.*,,, .... *#.... . ...... .o29

Table 1.16 Financial Rate of Return in Major Public SectorIndustries ................. os.......30

Table 1.17 Absorption of Labor in Industry .............................31Table 1.18 Recent Industrial Developments#***,. .... .......... o.32Table 1.19 The Structure of Manufacturing Exports ................. 33Table 1.20 Egypt - Petroleum Summary .... . . ... ..... .38Table 1.21 Rates of Growth of Major Petroleum Products

Consumption ......... ...... .. .... ..... 39Table 1.22 Natural Gas Production ..........Table 1.23 Resource Gaps with Drastic Import Cuts but without

Debt Relief ........... ....... 43Table 1.24 Commercial Bank's Net Foreign Currency Liabilities,

1981-85 .......... 45Table 3.1 Policy Reform Price Assumptions . .......... o................. 62Table 3.2 Outlook for the Balance of Payments Current Account ......... 63Table 3.3 Capital Account .......... ...... .. .......................... . 64Table 3.4 Composition of Imports Under Adjustment Program, Egypt ... 67Table 3.5 National Accounts, 1984/85-1993/94 ................... ........ 68Table 3.6 Resource Balance, 1984/85-1993/94 ..... ............. 69Table 3.7 Fiscal Balance with Policy Reform . . .............. 73Table 3.8 Medium-Term Outlook for the Oil & Gas Sector with

Economic Reform Program... *so .... ..... ................. . 75Table 3.9 Impact of Energy Price Reform ................. ............ 75Table 3.10 Effect of Public Sector Reform on Key Indicators. 77Table 3.11 Protection of Agriculture Relative to Manufacturing:

Egypt and Selected Developing Countries ............. 78

Graphs

Page No.

Graph 1. Nominal Exchange Rates ............ ............ ..... 4Graph 2. Indices of Real Exchange Rates ............................. 4Graph 3. Percent Change in Price Index ............................. 18Graph 4. Domestic and International Prices of Wheat . . 23Graph 5. Domestic and International Prices of Rice ............... 23Graph 6. Domestic and International Prices of Maize ........... ...... 24Graph 7. Domestic and International Prices of Sugar Cane .. 24Graph 8. Domestic and International Prices of Unginned Cotton ...... 25Graph 9. The Real Price of Petroleum & Fuels ................... ..... 36Graph 10. The Real Price of Electricity ... . 36Graph 11. Petroleum Summary . . .......... ...... 37Graph 12. Total Capacity by Type .......... ........ *................... 41Graph 13. Total Energy Generated by Type .......... , 41Graph 14. Peak Load versus Total Capacity ........................... 42Graph 15. Import Capacity without Policy Changes .................... 44Graph 16. Import Capacity: Various Scenarios ... 65Graph 17. Real Growth of GDP at Market Prices . ... 70Graph 18. Investment - Saving Balance, FY85-FY94 .................. 71Graph 19. Real Private Consumption ......... . .. .. .. 81Graph 20. Real Private Consumption Per Capi ta . ...................... 81

Page 1 of 2

COUNTRY DATA - EGYPT

AREA (Thousand) POPULATION a/ DENSITY1001.4 Sq. Km. 46.2 million (mid-1984) 45.1 per Square Km

Rate of Growth: 2.5X

POPULATION CHARACTERISTICS HEALTHCrude Birth Rate (per 1000) 33.8 Population per physician (1980) 970Crude Death Rate (per 1000) 10.9 Population per hospital bed (1978) 490

ACCESS TO SAFE WATER (% Pop.) NUTRITION (1982)Total (1980) 75.0 Calorie intake as X of requirement 128.0

Per capita protein intake (grams/day) 81.0

EDUCATION (Adjusted Enrollment Ratios)Primary 78.0Secondary 54.0

GNP PER CAPITA: US$720 b/

NATIONAL ACCOUNTS, 1984/85 AVERAGE RATE OF GROWTH(. 1984/85 constant prices)

US$ Mill. X 1975-FY81 FY81-FY85

Gross Domestic Product c/ 30310.3 100.0 9.4 5.6Agriculture 5695.7 18.8 2.5 1.6Industry & Petroleum d/ 9487.7 31.3 12.6 7.2Services e/ 13564.3 44.8 11.2 5.9

Consumption 25719.0 84.9 8.2 4.4Gross Investment 8311.8 27.4 7.6 3.8Exports of GNFS 8907.1 29.4 8.4 4.4Imports of GNFS 12627.6 41.7 5.8 1.5Gross National Saving 4726.3 15.6 46.2 1.0

PUBLIC FINANCE

Mill. LE 2 of GDP1984/85 1980/81 1984/85

Current Revenue 7358 27.1 22.6Current Expenditure 12440 36.4 38.1Current Deficit -5082 -9.3 -15.5Investment Expenditure 6556 21.7 20.1Foreig.- f ancing 2042 6.4 6.3

a! Most recent World Bank Atlas estimate.b/ Most recent World Bank Atlas estimate. 1984/85 divisional estimate is US$644c/ GDP for 1984/85 at current prices is valued at market prices.d/ Manufacturing and Mining, Electricity and Construction.e/ Distribution and Service Sectors.

Page 2 of 2

COUNTRY DATA - EGYPT

MONEY AND CREDIT 1980/81 1981/82 1982/83 1983/84 1984/85(In million Egyptian Pounds)

Money and Quasi-Money 8342 12044 15432 18480 20926Claims on Public Services Sector 10235 1300 14395 17233 20584Claims on Households and Enterprises 4957 7859 9627 11475 13987

BALANCE OF PAYMENTS MERCHANDISE EXPORTS 1984/85

1981/82 1982/83 1983/84 1984/85 US$ Mill. S

(In Million US $)Exports of Goods, NFS 7962 7855 8493 8907 Primary a/ 608 9.

Imports of Goods, NFS -11665 -11548 -13355 -12628 Manufacturers a/ 686 11.

Resource Gap (deficit = -) -3703 -3693 -4862 -3721 Petroleum b/ 4955 79.

Total 6249 100.

Net Factor Income 151 743 1335 113Net Private Transfers 51 26 26 22 EXTERNAL DEBT, June 30, 1985 c}

Current Account Balance -3501 -2924 -3501 -3586 US$ Mill

Direct Private Investment 885 966 897 964 Debt Outstanding andNet MLT Loans and Grants 1430 1546 1557 1764 Disbursed 17825Balance on Autonomous - Official 14159Transactions -1186 -412 -1047 -858 - Private 3666

Change in Reserves d/ -130 63 -17 0 Undisbursed Debt 3731Change in Arrears 0 0 0 1300 Total Service Payment 3873

RATE OF EXCHANGE Debt Service Ratio (S) e/ 34.

Weighted Average ($/LE) f/ 1.232 1.164 1.074 0.929 IBRD & IDA LENDING(June 30, 1985) (Mill. US$)

IBRD IDADebt Outstanding& Disbursed 981 771

Undisbursed 725 148Outstanding incl.Undisbursed 1706 919

a/ Excluding oil and oil productsb/ Includes foreign oil companies' exportsc/ Excludes some banking system liabilities and arrearsd/ Minus (-) indicates accumulation of foreign assets.e/ Exports of goods and services (including workers' remittances) but not foreign oil

companies' exportsf/ Weighted average of all current account items including transactions under the free

market ratb.

CURRENT ECONOMIC SITUATION AND ECONOMIC REFORM PROGRAMSUMMARY OF CONCLUSIONS

i. The external environment facing Egypt is much less favorableover the next ten years than over the past decade. The price of Egypt'smain export commodity--oil--has fallen by two-thirds from its peak in1980/81. The rapid growth in the past of both workers' remittances andtourist receipts has been reversed and they are now both falling.Earnings from the Suez Canal stopped their rapid rise and are now growingonly slowly. These developments have translated into growing deficits inboth the fiscal and external payments balances, which have grownunsustainably large. The domestic policies that were in place during thepast decade of rapid growth are no longer adequate in face of thedrastically altered external environment.

ii. After 1974, the growth of oil exports, workers' remittances,Suez Canal earnings, tourist receipts and capital inflows funded rapidlyrising Government expenditures, imports, investment and economic growth.The Government was able to simultaneously embark on a major investmentprogram, provide employment to the bulk of the labor force andincreasingly subsidize energy and basic consumption goods.

iii. The foreign exchange rate appre-ciated, not only for the pool offoreign resources controlled by the Government but also in the openmarket. The overvalued exchange rates and the heavy subsidization ofimports discouraged domestic production of tradeables. Both theagricultural and industrial sectors grew more slowly than the servicesector. A complex import control system and Government control over thebulk of investible resources created an inefficient domestic structure ofproduction, biased towards supplying the domestic market at high cost.While imports boomed, non-oil exports fell. The prices of many publiclysupplied goods and services fell increasingly below their economiclevel. This wfas most dramatically true for energy, food and transport.The result wab the creation of a large gap in the fiscal budget.

iv. The external environment worsened dramatically in 1986. Theprice of oil declined by 50S between January and June, 1986. During thesame period, tourism fell off as well. Now the short-term economicoutlook is difficult. The growth of GDP declined in 1985/86 and theoutlook is for further declines in the future and falls in standards ofliving. Even with cuts in imports through the end of the decade, Egyptwill be hard pressed to meet its mounting debt service payments. Totaldebt is 3251 of current account receipts, 1192 of GDP, and the debtservice ratio is over 401. This ratio will rise to over 60% in the nextfew years without some form of debt relief. Beyond the short-term, theoutlook under existing policies is one of continued economicdeterioration and declines in real per capita incomes.

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v. There is no escape from adjusting consumption, investment andimports to the reduced level of resources available to the economy. Itis necessary to reduce the fiscal and external deficits. It is equallynecessary to adjust key prices in the economy to induce improvements ineconomic efficiency to mobilize idle domestic resources and lay thefoundation for a resumption of growth in the medium-term.

vi. During 1986, Egypt has taken substantial steps in the rightdirection. The Government has formulated the outline of a medium-termreform program consisting of fiscal, balance of payments, credit andinvestment policies. In addition the program contains measures totransform the productive sectors, focussing on agriculture, energy andindustry. Although the Government is still in the process of fleshingout this outline with specific actions and their time-schedule, it hasalready implemented some of the measures. The President decreed along-awaited customs duty reform, that simplified the tariff structure,abolished import licensing by substituting a banned list, reduced dutvexemptions and changed the exchange rate used for customs dutyevaluations to a more realistic one. The Government has narrowed thescope of the system of consumption subsidies, introduced new taxmeasures, restrained the growth of Government consumption and reduced thepublic investment program in real terms. These will reduce theGovernment budget deficit substantially. The Government has begun thereform intended in the productive sectors recently by raising the priceof gasoline, removing forced procurement for most crops and raising morepublic sector output prices. While there is still quite a way to go inimplementing a sufficiently comprehensive and vigorous program ofeconomic reform, these initial steps reveal the Government's realizationthat such reforms are necessary and a new determination to actually carrythem out.

vii. Chapters two and three of this report outline and quanitfy aneconomic reform program designed to restore health to the economy andraise standards of living in the medium-term. With the vigorousimplementation of this reform program, the growth of GDP resumes andreaches 5%-62 by 1991/92. The fiscal deficit declines to 7% of GDP andthe current account deficit to about 6% of GDP by the same date. Thedebt service ratio falls to less than 30% and the total debt falls as ashare of both GDP and the current account receipts. The structure of theeconomy is much improved, as the higher growth comes from the non-oilproduction sectors, particularly industry and agriculture. Governmentrevenues and export receipts are diversified away from oil exports andSuez Canal receipts. Domestic savings rise and foreign savings fall as aproportion of GDP.

viii. The key policy changes are the unification and depreciation ofthe rate of foreign exchange, reform of trade policy, rise in energyprices, increases in the interest rate, a reordering of public investment

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priorities along with price liberalization and restructuring in theagricultural and industrial sectors. These policies work in a mutuallyreinforcing way to reduce the fiscal and external deficits, raisedomestic savings and induce efficiency changes which will restore growthto the economy.

ix. While such a program involve uncertainties, they are smallcompared to the virtuous circle that wouid be set in motion by theproposed policies. The very magnitude of the distortions that thepolicies are designed to correct indicate the potential for efficiencyimprovements. Egypt has impressive resources of talent, land, labor,capital and internatior.al circumstances that are lying idle. The modelunderlying the illustrations of economic change in this report is notable to capture all of the positive effects on economic behavior. Othercountries have found tremendous responses from the kind of changes inincentives that are proposed. Policy movement of the magnitude envisagedoften uncovers resources and efficiencies that are unexpected and thatprovide the momentum to secure growth of income even in the face ofadverse developments. Finally, Egypt can expect to benefit from a gooddeal of international goodwill and assistance once it is clear to allthat it has embarked on a serious program of reform designed to raise itslevel of real income on a sustained basis.

CHAPTER I

CURRENT SITUATION

A. Introduction

1.1 The period since 1980, when there was a contraction of foreignresources available to the economy, contrasts sharply with the period1974-1980, when external resources were growing quite rapidly. Between 1974and 1980, the Egyptian economy grew by 9% per annum, stimulated by anextraordinary increase in foreign earnings. Current account receipts rose by25S per annum over this period while capital inflows increased by 50% perannum. The main sources of external income were oil exports, workers'remittances, Suez Canal earnings and tourist receipts, which in total grewfrom U.S. $700 million in 1974 to U.S. $8.8 billion by 1980/81, to over 70S oftotal export earnings. Other commodity exports fell from U.S. $1.6 billion toU.S. $1.1 billion over the same period as the real effective exchange rateappreciated and the domestic economy absorbed more of what was produced.Current account outflows grew by 20% per annum. Capital goods imports rosethe fastest, by 33X per annum, reflecting an investment boom, whileintermediate goods increased by 9S per annum and consumer goods by 15% perannum. Agricultur.. imports grew particularly rapidly, from U.S. $1 billionin 1974 to U.S. $2.7 billion by 1980/81.

1.2 Egypt's fiscal and monetary situation improved over this period foressentially the same reasons. The surpluses of the petroleum corporation andthe Suez Canal Authority flowed into Government revenues, which increased from272 of GDP in 1974 to 43S of GDP by 1980/81. Even though Governmentexpenditures rose from 48% to 58S of GDP, the budget deficit fell from 212 to162 of GDP over the same period. Public saving soared, from just over LE 100million to LE 1.9 billion and both foreign and domestic bank financing of thebudget deficit fell as a percentage of the total deficit.

1.3 While Egypt's resource position improved dramatically over thisperiod, the domestic economy suffered growing inefficiencies. Adisproportionate share of GD? growth occurred in the energy and servicesectors, while the agricultural and industrial sectors fell as a proportion ofGDP. The combination of rapid inflation abroad and fixed prices at homecreated distortions in the domestic economy. Controlled prices for consumergoods, energy, transport, rents, public sector wages and foreign exchai.gelagged far behind international or economic prices. Even domestic prices formany of the same goods were higher in the uncontrolled parts of the economy.This resulted in duality in the economic system. Although fixed pricesavoided stressful adjustments in the living standards of those with access tocontrolled goods and services, this created distortions and inefficiencies indomestic production.

1.4 Egypt's population, soon to reach 50 million, is large and growing by2.6% per annum. Almost half of this growth is concentrated in the greaterCairo area. Arable land is quite limited, with an average population densityhigher than Bangladesh or Indonesia. The family planning program is weak.The economy, despite its rapid growth, provided insufficient employment

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opportunities in the productive sectors. Value added from oil production andthe Suez Canal rose from 52 of GDP in 1974 to 18% in 1980/81 but employment inthese two sectors increased to less than 1Z of the labor force. Little of thegrowth of the labor force was absorbed in the agricultural and industrialsectors (about 151). A larger portion was absorbed in the construction, tradeand finance sectors (about 251). The bulk (over 501) was employed by theGovernment itself, swelling budgetary outlays for this purpose. The remaindereither emigrated or joined the ranks of the unemployed.

1.5 Egypt's economic growth began to slowdown in 1980, reflecting a sharpdecline in the growth of external resources. Between 1980/81 and 1984/85current account receipts grew by only 41 per annum, while current externaloutflows rose by 6% per annum. Imports grew faster than exports, even thoughcapital goods imports fell by 61 per annum. Net capital inflows increased byonly 51 per annum over the period as debt service payments from previous loansmounted. Fiscal revenues grew slowly, falling as a percentage of GDP from 431in 1980/81 to 351 in 1984/85. Public expenditures remained at 58% of GDP.Public saving declined by almost 50% and the budget deficit rose to 241 of GDPby 1984/85. The growth rate of GDP was in the 52-6% range in 1984/85.

1.6 The immediate cause for this rapid deterioration was the decline ofEgypt's main foreign revenues-oil exports, workers' remittances, Suez Canaltariffs and tourist receipts. The price Egypt earned for oil exports peakedin 1980 and has fallen since, adding to the problem. For a while an increasedvolume of oil exports more than offset the initial price decline. However,from 1980/81 onwards the price has fallen faster than the export volume hasincreased, resulting in declining revenues in every year. Workers'remittances and earnings from the Suez Canal fluctuated, following no cleartrend.

1.7 A comprehensive and vigorous program of reform of the fiscal,monetary, balance of payments and productive sector policies is warranted.The Government has considered the problem and possible solutions. As fiscalrevenues from oil exports and the Suez Canal fell, the Government took stepsin 1984/85 and 1985/86 to reduce the budget oficits. These measures wereinadequate to offset the overall decline in Lscal revenues and the budgetdeficits continued to rise to over 20X of GDP.

B. External Situation

1.8 External developments during 1985/86 were disturbing. Egypt's exportprice for oil dropped by over U.S. $15 per barrel between December, 1985 andJune, 1986. This sharply accelerated the decline in the value of oil exportssince 1980. Workers' remittances and tourist receipts fell as well. SuezCanal receipts rose, but by only U.S. $50 million. Inflows of medium and longterm capital, including grants, fell. For lack of financing, imports fellsharply. Nevertheless, the overall balance showed a large gap, which couldonly be filled by short-term capital movements and increases in arrears indebt payments.

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The Exchange System

1.9 The foreign exchange market in Egypt is fragmented in threepools-the central bank pool, the commercial bank pool, and the free marketpool-and involves an even larger number of exchange rates.

1.10 The central bank pool handles exports of petroleum, raw cotton, andrice; Suez Canal dues; pipeline revenues; imports of essential food- stuffs,insecticides, and fertilizers; a large portion of public sector capitaltransactions; and transactions through bilateral payments agreements. Theexchange rate which applies to most transactions through this pool has beenunchanged since January 1, 1979, at which time the buying and selling ratesfor the U.S. dollar were set at LE 0.700 and LE 0.707, respectively. Aspecial exchange rate applies to some transactions under bilateral agreements.

1.11 The commercial bank pool covers mainly workers' remittances; tourismreceipts; some exports other than petroleum, raw cotton, and rice; certainprivate sector imports; and public sector imports and capital transactions notassigned to the central bank pool. Early in 1986/87, the Governmenteliminated the official commercial bank rate, which had been set at LE 0.845since August, 1981.. Now, most transactions take place at premium rates,around LE 1.35/US$l. Premium rates have been maintained at around this levelfor the last year or so. Opening of letters of credit, reportedly, take placeat a slightly more depreciated rate (LE 1.60 = US$1), although this practiceis not yet officially sanctioned.

1.12 The free market pool shares common sources of supply with thecommercial bank pool (workers' remittances, tourism, and export receipts) andsupplies exchange for most visible and invisible transactions by the privatesector. In October 1986, the rate in the free market pool was reported to bein the range of LE 1.90 to LE 1.95 per US$1. Imports through this market aresubject to import licensing. Some imports of basic foodstuffs, until recentlyrestricted to the public sector, have been authorized through this market inthe last few months. Private sector imports of invisibles and capitalmovements also take place through the free market.

The Exchange Rate

1.13 Graphs 1 and 2 depict movements in the main exchange rates used inEgypt in both nominal and real terms. The graphs make clear that, following aunification of all of the official rates close to the market rate in January1979, all rates appreciated in real terms for a few years. The Central Bankrate, which has remained fixed in nominal terms to the U.S. dollar, hassteadily appreciated since 1979.

1.14 The Commercial Bank rate (becoming the "premium" rate in 1983), whichhas been depreciated in nominal terms in several episodes, appreciated in realterms between 1979 and 1982/83. Then in 1983/84 and 1984/85, the depreciationof the Commercial Bank rate in nominal terms was large enough to cause itsdepreciation in real terms as well. Since January, 1985, the Commercial Bankpremium rate has been set frequently by a committee that meets at Central Bankat various levels. Nevertheless its nominal depreciation has not beensufficient to stop this rate from appreciating in real terms.

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Graph 1: Nominal Exchange Rates

e,,<~~~~~~~~~~~~~~~~~~ 4 Cetral Bank

09~~~~~~~~~~~~~~~~~ WIghted Average

ns7 t \ Commercial Ban:<

s z - Premium

2.S' ~ ~ ~ ~ ~ ~ Ys

a.

The weights vary each year, based on the value of transactions inthe three foreign exchange pools. A rise in this graph indicatesa nominal appreciation.

Graph 2: Indices of Real Exchange Rates240 1 Central Bank

130

210 /

2ISO -

ISO

1.0

_.0 Weighted AverageCommercial BankPremium

tO0 _ Free Market

so ~ ~ ~ ~ ~ ~ Yu

1374 1076 1378 1960/81 1062/80 9064/88

The index of the real exchange rate is calculated tsina a weighted averageof the dollar ifport and export price indices as the index of foreign prices.A rise in the graph inpicates a real aoreciation.

5-

1.15 The real exchange rate in the free market moved since 1979 in closecorrespondence with the inflow of workers remittances, the main supply offoreign exchange into this market. The rate appreciated between 1979 and1983/84, excepting a depreciation in 1981/82 (when remittances also fell). In1984/85 and 1985/86, both workers remittances and the real exchange rate inthe parrallel market fell.

1.16 The graphs also present movements in a weighted average exchangerate. The weights used in the construction of this average change every year,according to the actual flows through the respective foreign exchange pools.This means that shifts of transactions from more appreciated to lessappreciated pools are reflected in the weighted average rate as depreciatingtendencies. Such shifts have in fact taken place and help explain thedepreciation in the weighted average rate in 1984/85 and 1985/86. This rateis nevertheless still more appreciated than in 1979 and needs to be sharplydepreciated to restore incentives for domestic production. Unifying all ofthe pools and rates into one free market is the best way to achieve this.

Forei8n Exchange Earnings

1.17 Petroleumi'. Egypt's balance of payments is heavily dependent onpetroleum. Not only is petroleum the largest single earner of foreignexchange, other major sources-workers' remittances, Suez Canal traffic, eventourism-are closely related to the conditions in world oil markets. From1974 to 1984/85, crude oil production rose from 7.5 million tons to 43.7million tons. Between 1974 and 1980, the price rose as well, peaking inJanuary, 1981 at a weighted average of U.S. $38 per barrel. Since then theprice has fallen steadily, until it reached about U.S. $26 per barrel inDecember, 1985, falling by U.S. $12 per barrel over five years. It fellanother U.S. $12 per barrel over the next five months, to less than U.S. $14per barrel by April, 1986. It fell to below US$10 per barrel in July, 1986,although it has strengthened to around US$12 per barrel by October 1986. Thevolume of production also fell. In the last half of 1985, crude oilproduction exceeded 900,000 barrel per day. Starting in January, 1986, theGovernment curbed production to about 650,000 barrels per day, just enough tomeet domestic consumption requirements, payments to foreign oil companies anda small volume to fulfill long-term export agreements. It has fluctuatedsince then, reflecting market conditions. Egypt exported very little oilduring the first half of 1986 to earn foreign exchange for its own uses.

1.18 Domestic consumption of petroleum products grew by over 10% per annumbetween 1974 and 1983/84 but has begun to slow since. The growth rate indomestic consumption was 6.62 in 1984/85 and is a negative 3% in 1985/86 forliquid products. Including natural gas, total oil and gas consumption rose byonly 31. This reflects the slowing in the rate of growth of economicactivity, not demand management. In fact the real price of petroleum productshas continued its long-term decline.

1.19 The Government has been slow to raise domestic petroleum pricesdespite a clear recognition of the need to do so. The prices of fuel oil,

1/ The petroleum sector is discussed in more detail later in this chapter.

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diesel, kerosene and natural gas are particularly important as these make upthe bulk of domestic consumption. Their prices do not even cover the domesticcosts of refiring and marketing and are far from international levels. TheGovernment did raiee the price for fuel oil and natural gas in 1983/84 and1984/85 to some users-cement and brick makers and the Electricity Authority.The prices of diesel and kerosene have not been raised, despite the intentionas expressed in the 1985/86 budget to do so. The price of gasoline was raisedby 25% in 1985/86 and by another 252 early in 1986/87. Nevertheless, theweighted average price of all products is still about one-third ofinternational prices.

1.20 Workers' Remittances. A large number of Zgyptians work temporarilyabroad and remit part of their earnings home. There are no reliablestatistics of how many workers live abroad but the Government uses an estimateof three million. The Government also estimates the total saving of Egyptianworkers is around U.S. $9 billion a year, or U.S. $3000 per worker. Althoughmany of the workers are unskilled, or low-skilled, many are professionals,including teachers, researchers and service professionals. Recordedremittances are shown in Table 1.1. They include the imputed value of "ownexchange" imports (i.e., imports which are financed by the "own" sources ofthe importer, as opposed to the commercial banks) as well as cash transfersthrough the four public sector coumercial banks, and "self-financing" of Law43 companies. The levels of recorded workers' remittances have fluctuatedmore than the earnings of Egyptians abroad. Remittances fell from U.S. $2.9billion in 1980/81 to U.S. $1.9 billion in the next year, rose to U.S. $3.2billion in 1982/83 and to U.S. $3.9 billion in 1983/84, then fell to U.S. $3.5billion in 1984/85. They are expected to fall again in 1985/86, perhaps toU.S. $2.9 billion.

1.21 The big fall in 1981/82 was widely attributed to the politicaluncertainties following the assassination of President Sadat. The subsequentrecovery was thought to accompany the resumption of more normal conditions.The falls in 1984/85 and 1985/86 have been attributed to changes in thearrangements under which remittances enter the country and instability in theGulf area. Although there is little doubt that employment conditions forEgyptians abroad have tightened in the wake of the lower price for oil,savings of Egyptian workers still probably exceed remittances home by a largemargin. Recently, the Government has focused on what it believes is a largepool of savings (perhaps U.S. $50-70 billion) of Egyptians held abroad thatcould be tapped to help finance the deficits in the balance of payments. Thelow domestic interest rate for Egyptian pound deposits and lack of profitableinvestments provide disincentives for such transfers. The Government hasrecently announced a program to sell bonds in foreign exchange with taxexemptions designed to attract these savings. Encouraging Egyptians to investtheir financial assets within Egypt will require a greatly improved domesticenvironment for profitability and security of private investment.

1.22 Tourism. Egypt has substantial attractions as a touristdestination. Many European and North American tourists come for culturalreasons while visitors from other Arab countries come mainly for leisure.Since 1974, tourism has risen by 502, measured by the number of nightstourists spent in Egypt. Between 1974 and 1980, all of this rise came from anincrease in tourists from O.E.C.D. countries, while tourism from Arab

Table 1.1: SUMMARY BALANCE OF PAYMENTS(In million of US dollars))

Prelim.Actual Estimated

1979 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86

1. Exports of goods and 5401 7803 7962 7855 8493 8907 8742and nfs of which:

Total petroleum exports a/ 2825 4489 4669 4166 4539 4955 4348Egypt's share ofpetroleum exports 1878 3179 3329 2809 2964 2891 2351Tourism 601 712 611 304 b/ 288 b/ 409 b/ 348 b/Suez Canal 589 780 908 957 974 897 994

2. Imports of goods and -8781 -11412 -11665 -11548 -13355 -12628 -11648nfs of which:

Foreign oil companies -531 -650 -700 -750 -750 -814 -800

3. Net factor income 1376 1190 151 743 1335 113 c/ -683 c/of which:

Remittances 2445 2855 1935 3166 3931 3496 2950Interest payments -428 -759 -912 -1619 -1567 -2119 c/ -2425 c/Transfers of foreignoil companies -947 -1310 -1340 -1357 -1575 -2064 -1997

4. Net private transfer 89 63 51 26 26 22 30

5. C'urrent account deficit -1915 -2356 -3501 -2924 -3501 -3586 -3559

6. Medium and long termcapital (net) 2527 2280 2315 2512 2454 2728 2685(a) Official loans and

grants (net) 890 1220 1385 1257 1762 1829 1665(b) Private loans (net) 262 224 45 289 -205 -65 -2(c) Direct investment 1375 836 885 966 897 964 1022

7. Balance on AutonomousTransactions 612 -76 -1186 -412 -1047 -858 -874

8. Changes in reserves -37 -75 -130 63 -17 0 1749. Change in Arrears 0 0 0 0 0 1300 700

a/ Includes exports of foreign oil companies.b/ Earnings from Egypt Air transferred from this category to that of nonfactor

services.c/ Prior to 1984/85, data for interest payments was incomplete. Interest

payments for 1984/85 and 1985/86 are Bank staff estimates of total interestdue on foreign debt.

Source: Central Bank of Egypt and World Bank staff estimates.

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countries fell. Since then, the roles have reversed, as O.E.C.D. tourism hasfallen while that from other Arab countries has risen back almost to its 1974level. The outlook for 1985/86 is for a substantial fall in tourism due tosecurity problems in the Mediterranean area. Tourist receipts recorded by theCentral Bank peaked in 1980/81 and have fallen since. The Ministry of Tourismbelieves that total tourist expenditures are several times recorded receipts,as tourists often exchange in the free market. The Government has sought tolimit this diversion of foreign exchange from the banking system through morerestrictive procedures governing tourist transactions and through increases inthe commercial bank rate for tourists. The rate rose from LE 0.83/U.S. dollarto LE 1.12 in March 1984 and to flexible rate in January, 1985, which hasmoved from LE 1.25 then to about LE 1.35 in the first half of 1986. Themarket rate rose even faster and tourists still have high incentives toexchange in the market.

1.23 Suez Canal. Suez Canal revenues experienced a pronounced upwardtrend from the reopening of the canal in 1975 through 1983/84. Through 1980,this growth was almost entirely attributable to the increased flow of trafficas tariff rates remained virtually unchanged. Following the completion of theexpansion program in late 1980, which was designed to accommodate an increasedflow of traffic as well as larger vessels, toll revenues were raisedsubstantially: first by 32 in 1981, 52 in 1982, 6.5% in 1983, 5% in 1984, 22in 1985 and 3% in 1986. These tariffs are now expressed in SDRs and the U.S.dollar revenues are affected by the fluctuations in the SDR/dollar rate. Mostrecently, this has meant a higher increase in dollars than in SDRs.Nevertheless, the volume of traffic fell in 1984/85, due to the lower oilproduction in the Gulf. The volume rose again in 1985/86 as oil productionrebounds.

1.24 Other Commodity Exports. In contrast to the four sources of foreignexchange discussed above, non-oil commodity exports showed a secular declinein nominal U.S. dollar terms from 1974 through 1982/83. These exportsdeclined in value terms from U.S. $1.6 billion in 1974 to U.S. $1.1 billion in1982/83. They experienced a much greater decline in volume terms. Theyincreased to U.S. $1.4 billion in 1983/84 following improved exportincentives. Given the fall in commodity prices in U.S. dollars, export volumerose sharply. The most important incentive introduced was allowing exportersto retain their foreign exchange earnings, which essentially allows them touse the market exchange rate to convert their earnings. Some of the rise inexport volume arose from increased yarn exports which were later curbed due todomestic shortages. In 1984/85, non-oil commodity exports fell to U.S. $1.3billion. They are estimated to have risen back to U.S. $1.4 billion in1985/86. Four broad groups can be distinguished within this category: cotton,other agricultural products, textiles and other manufactured exports. In thelong run, it is this category of exports Egypt must depend upon to finance itsimport needs. Some changes to simplify export procedures would help; but themain need now is to restructure the domestic productive structure to lowercosts and improve efficiency, so Egyptian exporters can compete successfullyon world markets.

Imports

1.25 Imports rose very rapidly from 1974 through 1980/81, when theyexceeded U.S. $10 billion. They stayed at essentially this level until they

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leaped again in 1983/84, when the general election prompted an increase in theimport of basic consumption goods. Since then imports have been lowerreflecting the scarcity of foreign exchange. The Government has incr-asedrestrictiveness over private sector imports. Public sector imports areconstrained by the availability of foreign exchange in the commercial banks.In 1985/86, even greater scarcity of foreign exchange forced a further fall inimports. The composition of imports has changed in an unhealthy way over thepast five years. Food, other agricultural imports and intermediate goodsincreased as a proportion of the total. Capital goods fell substantially.Service payments rose continuously over the period. In August, 1986, theGovernment implemented a new import control regime. It raised the exchangerate for customs duty evaluation from LE 0.84/US$l to LE 1.35. It abolishedthe Imports Rationalization Committee, which had previously licensed privatesector imports. It substituted a banned list. It reduced the number oftariff categories and narrowed the spread of tariffs. It also sharply reducedduty exemptions.

Capital Account.

1.26 Direct Foreign Investment. Foreign oil companies provide the bulk ofdirect foreign investment in Egypt. These companies have been active frombefore 1970 and their efforts have paid off handsomely both for their ownersand for Egypt. The recent fall in the price of oil may have some impact onthe companies' investment in Egypt but its effect will be limited. By nowseveral large companies are well-established and are unlikely to change theirdevelopment plans dramatically because of the fall in the world oil price.The oil companies may delay entering into new production-sharing explorationcontracts while the price of oil is so low. Direct foreign investment in Law43 companies has been estimated at a steady U.S. $150 million per annum, orso, for several years. This level of investment is not expected to increasemuch without a change in the internal environment to make these investmentsmore profitable. Nevertheless, the total level of direct foreign investmentshould remain close to its present level of around U.S. $1 billion in the nearfuture.

1.27 Capital Grants. Egypt's history of capital grants is virtually theinverse of that of its current account receipts. Following the 1973 war,Egypt became the recipient of large capital inflows--both grants andloans-fro other Arab countries. In 1974 alone, grants amounted to U.S. $1.3billion. The grant total fell steadily until 1979, when it was less than U.S.$100 million. Then, following the Camp David accords, the level of grantsbegan to rise again. This time the source was O.E.C.D. countries, mainly theUnited States. Total grants exceeded U.S. $1 billion in 1984/85. In 1985/86,the grant total is expected to reach U.S. $1.4 billion. Most of the increaseis due to a special supplementary cash grant of U.S. $500 million over twoyears from the United States which all disbursed during Egypt's 1985/86 fiscalyear. The United States also transformed some of its regular project aidprogram to cash. Beyond 1985/86, the outlook is that grants would fall backbelow U.S. $1 billion, as a repeat of the special supplementary cash grantfrom the United States is very unlikely.

1.28 Medium and Long Term loans. Disbursements of medium and long termofficial loans started low in 1974, built up rapidly by 1977 and have been

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lower since. They were U.S. $140 million in 1974 but rose to U.S. $2.2billion by 1977, largely from other Arab oil-exporting countries. They thenfell to U.S. $1.1 billion by 1979. Since then they have ranged between U.S.$1.2-1.5 billion, mainly from OECD donors. In 1985j86 disbursements areexpected to be around U.S. $1.3 billion. The Government of Egypt has recentlyrestricted undertaking new commitments of loans because of concern over thesize of the external debt. This has slowed disbursements on medium and longterm, project-related loans.

1.29 Repayments of these loans have mounted in the past six years.Amortization of official loans ranged between U.S. $100-200 million per annumbetween 1974 and 1979. Since then, repayments have risen to U.S. $500-600million per annum in the past two years. Repayments are scheduled to continueto rise in the future.

1.30 Suppliers' Credits. Since 1974, both disbursements and repayments ofsuppliers' credits have risen steadily. Net disbursements have beenrelatively small and, in recent years have sometimes been negative. Manyofficial agencies that guarantee suppliers' credits have become increasinglyreluctant to increase their exposure in Egypt in the past several years. Ifthis continues, net disbursements may become persistently negative in thefuture.

1.31 Gap Financing. During the past five years, normal capital inflowshave not been sufficient to finance the current account deficit. Egypt hashad to resort to extraordinary means to finance its current account. Egypthas built up arrears in payments to official creditors. Some of thesearrears, particularly those to Arab countries, are well-documented. Others toeastern bloc countries are less well-known but are currently subject tonegotiation between the parties. Arrears to O.E.C.D. countries are a morerecent phenomenon and are difficult to estimate precisely due to the poorstate of debt information. It is clear arrears in debt service payments to0.E.C.D. countries exceeded U.S. $1 billion by the end of 1984/85 and mayreach U.S. $2 billion by the end of 1985/86. Another way Egypt finances itsbalance of payments gap is by using the counterpart of the foreign currencydeposits in its commercial banking system. Over the past five years the netexposure (the excess of foreign currency liabilities over assets) of the fourpublic sector commercial banks has fluctuated between U.S. $1-2 billion. Atthe beginning of 1986, they were over U.S. $2.5 billion. The continuedability of Egypt to make use of this source of foreign currency to financegaps in the balance of payments depends on the confidence of the depositors ofthe soundness of the foreign currency position of the commercial banks.

External Debt

1.32 Egypt's external debt is large and burdensome. At mid-1985, thepublicly guaranteed medium- and long-term civilian debt was reported at U.S.$16.2 billion (see TWIle 1.2). Private non-guaranteed debt is about U.S. $950million. Other banking system obligations, not reported in the Debt ReportingSystem, are estimated at U.S. $8.9 billion, of which US$6.5 billion isshort-term debt. In addition to this U.S. $26 billion of civilian debt is anestimated U.S. $7.8 billion of military debt (excluding an estimated U.S. $3billion military debt to the eastern block countries, which is not being

- 1.1 -

serviced). Total scheduled debt service payments in 1984/85 are estimated tohave been about US$3.9 billion, giving a debt service ratio of 352. During1985/86, debt service payments are projected to rise to U.S. $4.2 billion, or422 of current account receipts.

1.33 Without adequate economic reform and support from the internationalcommunity, Egypt's external debt service will become unsustainable. It isurgent for the Government to undertake appropriate policy actions and thenapproach the international community to restructure its debt and increase theflow of fast-disbursing assistance for a few years until policy actionrestores economic growth and viability in the balance of payments. With suchaction, the World Bank, the International Monetary Fund and bilateral agenciescan support a reform program to ease the path of adjustment and restoreeconomic health.

Table 1.2: STRUCTURE OF DISBURSED AND OUTSTANDINGIDENTIFIED EXTERNAL OBLIGATIONS(In millions of US dollars)

June 1983 June 1984 June 1985

Multilateral 3384.0 3688.1 3890.9

of which IBRD 668.1 834.5 981.3IDA 579.5 719.8 771.0

Bilateral 9107.7 9666.0 10268.6

DAC 5683.0 6273.1 6861.7OPEC 2805.4 2769.5 2758.9CPE 616.4 623.1 647.6

Suppliers Credit 1720.3 1789.0 2062.6

Non-Bank Borrowing 852.6 910.1 950.0 I'

Banking SystemLiabilities 7106.0 8096.0 8897.0

Central Bank 2349.0 2667.0 3098.0Commercial Banks 2502.0 3008.0 3377.0Business andInvestment Banks 1676.0 1676.0 1486.0

Specialized Banks 579.0 745.0 936.0

Total Civilian 22118.5 24068.0 26069.1of which short-term 4851.0 5675.0 6475.0

I/ Estimate.

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C. Fiscal and Monetary Trends

1.34 The public sector dominates economic activity in Egypt. Totalbudgetary expenditures exceed half of GDP; budgetary revenues are aboutone-third; and the overall fiscal deficit exceeds one-fifth of GDP. This hasrequired a major recourse to borrowing from the banking system, resulting in astrong link between the budget and monetary growth. The hi,h level ofgovernment expenditure has diverted scarce resources often into uses which areof low economic value. The expansionary effect of the budget on money supplyhas tended to generate and sustain strong inflationary pressures in theeconomy. The major fiscal issues are:. the need to raise public savings byincreasing prices of goods and services which are linked to the budget; theneed to have greater control over current expenditure; the need to control andbetter monitor outlays on consumer subsidy; the need to cut the size of thepublic investment program and rationalize its contents; the need to minimizethe influence of external factors, improve the link between revenues andeconomic activity and augment the role of discretionary factors in revenuemobilization.

1.35 Following a decline in oil revenues from their peak in 1980/81, and aslower than anticipated growth in Suez Canal earnings, the overall fiscaldeficit reached 252 of GDP in 1981/82 (see Table 1.3). A large part of thedeficit was financed through borrowings from the banking sector. The budgetdeficit narrowed somewhat in 1982/83, falling to 21Z of GDP. This was broughtabout by some tax and expenditure control measures undertaken by theauthorities. The expenditure measures included a slowdown in the growth ofinvestment and a decline in outlay on consumer subsidy aided by low importprices. On the revenue side, measures included an increase in the scope ofexcise taxes, a restructuring of taxes on corporate and personal incomes andan improvement in tax collections. Reflecting the reduction in the overallbudget deficit and efforts to raise financing from non-bank sources, bankfinancing of the budget deficit fell from 8% of GDP in 1981/82 to 5% of GDP in1982/83.

1.36 The 1983/84 budget sought to further improve the fiscal situation.The overall deficit fell slightly to 202 of GDP. The strategy was to raisetax revenue primarily through continued efforts to improve tax assessment andcollections and by eliminating a number of tax exemptions; but also through aminor adjustment in the tax rates on personal and business incomes, and anincrease in customs tariffs by 50% on luxury cars. Expenditures were curbedby restraining both current and investment outlays, and by reducing subsidiesby implementing a substantial increase in the price of bread.

1.37 Following the national elections in May 1984, the Government decidedto delay presenting the 1984/85 budget to Parliament until September in orderto allow the new Cabinet and the new Parliament sufficient time to reflect onthe new budget. The budget was approved by the Egyptian Parliament as ofOctober 1, 1984. The key policy initiatives included a partial increase inthe price of bread, a further increase in the price of electricity, someincreases in the price of selected public enterprise commodities, and apackage of tax and fee measures aimed at taxing remittance income at thesource. The total discretionary impact of these measures on the budget wasprojected by the Government to be about LE 900 million. The overall and net

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Table 1.3. SUMMARY OF FISCAL DEVELOPMENT 1981/82-1985/86 a/(in millions of LE/current prices)

1982/83 1983/84 1984/85 1985/86 1986/87(Actual) (Actual) (Prelim. (Estimated) Budget

Actual)

Total public revenue 9748.9 10370.1 11312.5 11799.0 13395.1

Tax revenue 5362.1 5677.6 6280.0 7078.0 8892.1Non-tax revenue 834.2 990.0 1078.0 1184.0 1374.3Profit transfers 2045.5 2074.8 1943.5 2076.0 2461.9Investment self-financing 1507.1 1627.7 2011.0 1461.0 666.8

Total public expenditure 14531.8 15906.8 18996.0 20131.0 18946.2

Government and servicesagencies expenditure 6176.7 7608.1 8881.0 10182.0 10789.0

Public authoritiescurrent deficit 127.6 192.8 268.0 280.0 262.9

Consumer subsidies 2053.7 1986.6 2749.0 2500.0 1746.1Net capital transfers 1154.0 601.3 542.0 769.0 898.2Investment expenditure 5019.8 5518.0 6556.0 6400.0 5250.0

Gross fiscal deficit (-)4782.9 (-)5536.7 (-)7683.5 (-)8332.0 (-)5551.1Foreign financing(gross) 1354.3 1440.5 2042.0 1819.0 1837.5

Non-bank domesticfinancing 2209.8 2102.0 2468.5 3045.0 2933.6

Bank financing 1218.8 1994.2 3173.0 3468.0 780.0

Memo items(as 2 of GDP)Public expenditure 63 58 58 54 42Public revenue 42 38 35 32 30Gross fiscal deficit 21 20 24 22 12Bank financing 5 7 10 9 2

a/ For notes and sources of information see Appendix Tables.

Sources: Ministry of Finance and World Bank staff estimates.

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fiscal deficits were projected at LE 5.4 billion (16% of GDP) and LE 1.2billion (4% of GDP) respectively. The outcome was much worse: the overalldeficit was LE 7.7 billion (24% of GDP) and bank borrowing was LE 2.5 billion(10% of GDP).

1.38 The Government presented an ambitious budget to the People's Assemblyfor 1985/86. The budget was based on measures to reduce the deficit to LE 4.9billion (14% of GDP) and bank borrowing to only LE 900 million (32 of GDP).The revenue measures were designed to raise an additional LE 1.5 billion, LE600 million from raising energy prices, LE 700 million from increased customduties and the remainder from increasing a variety of public sector prices(for telephone and railway services and increasing the return from publicsector companies). The goal for expenditure measures was to decrease the costof Government by 52 in nominal pound terms by restraining the growth of thewage bill and reducing subsidy expenditure. The energy price increasesenvisaged were quite substantial: raising electricity tariffs by an average of37X, raising gasoline prices by 252, doubling kerosene and diesel prices andquadrupling fuel oil and natural gas prices.

1.39 Only a small portion of these measures were implemented. Theelectricity and gasoline prices were raised as planned. The other energyprices were not. There was some effort to reduce the access to subsidisedgoods, particularly maize and the supply of some other consumption goods werediverted to the private sector.

1.40 At the end of March, the Government introduced a package of measuresto the People's Assembly that included some of the ones originally planned andsome new ones. The Government again estimates the revenue measures will yieldLE 1.5 billion over a full year. The expenditure measures are to yield LE 500million. Most of the revenue increase is to come from a variety of taxes onbusinesses, cigarettes, car licences, home appliances, land and foreigntravel. Fees were raised for telephone services and for the tution of foreignstudents. Custom duties are to be raised by eliminating most exemptions,raising tariffs on luxury goods and using a higher exchange rate--LE 0.83/$rather than LE 0.70/$-for valuing imports for custom duties. Expendituresare to be reduced by 52 for public investment and current expenditures, exceptwages, pensions and debt service.

1.41 In addition to these, the Government introduced a series of measuresto ease the balance of payments deficit. The Government will issue dollarbonds with an attractive interest rate. Non-Egyptians will be allowed to buyresidences in Egypt. Foreign exchange expenditures are to be cut by reducingthe expenditures of foreign missions by 25% and cutting the foreign exchangecomponent of public investment by 102. The balance of payments measures weremeant to yield US$1.3 billion.

1.42 Reductions in the budget and balance of payments deficits by thesemagnitudes would be in Egypt's interests. The measures have been designed toavoid affecting lower income groups. Nevertheless, the impact of the measuresactually implemented were small in 1985/86. Some of these March, 1986measures, such as the custom duty reforms, were not implemented until early in1986/87. The budget deficit ended up close to LE 8.3 billion (22% of GDP) andbank borrowing over LE 3.5 billion (91 of GDP). (See Table 1.3). The 1986/87

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deficits could reach the same levels as in 1985/86 without additionalmeasures, due to the impact of the fall in the price of oil on the budget,the inelastic nature of the revenues and the growth of expenditures notconstrained by these measures. The nature of these measures taken so far meanthey will not bring about major improvements in efficiency. For instance, theoriginal schedule for raising energy prices is still only partly implemented.It is unclear how the cuts in the public investment program will be made; ifthey are to be made across-the-board, they will not improve the efficiency ofthe investment program.

1.43 The Government's 1986/87 budget seeks to limit the overall fiscaldeficit to LE 5.6 billion (12Z of GDP) and bank borrowing to less than LE 800million (2Z of GDP). These targets are to be achieved by raising revenuethrough a reform of the customs duty, by raising public enterprise outputprices and by further increases in energy prices, and through expenditurereduction measures including a substantial cut in subsidies, continuedrestraint on other current expenses and a further rationalization of publicinvestment. The customs duty reform and public enterprise price increases areexpected to yield over LE 1.0 billion while the subsidy bill and investmentexpenses are to be reduced by LE 0.7 billion and LE 0.3 billion respectively.Although the targets are ambitious, the Government has made progress inimplementing parts of the fiscal program. The customs duty reform wasactually implemented on August 21, 1986 and will raise additional revenues.This, along with reduction in the scope of subsidies and greater restraint ingovernment current consumption, improves the outlook for the budget in thisfiscal year. There are also some indications of greater price flexibility forpublic enterprises. However, the energy price measures that were to beintroduced in August 1986 were still not implemented by October 1986. On thewhole, a significant reduction in the budgetary deficit, from around 222 ofGDP in 1985/86, appears feasible. How close this will be to the officialtarget of 12Z of GDP would depend on the pace of implementation of the energyprice reform, the progress with ensuring a flexible pricing policy for publicenterprises and the ability to sustain the expenditure targets, particularlythe subsidy reduction program.

Recent Monetary Developments.

1.44 As noted above, in Egypt there is a strong link between fiscal andmonetary developments because the banking system is a major source of domesticborrowing for financing the fiscal deficit. The relationship between thefiscal gap and domestic liquidity is almost automatic; the higher is thefiscal deficit, the larger is the budget's impact on the expansion of domesticcredit.

1.45 Following a period of very rapid growth, the growth in the moneysupply (currency plus private sector deposits) decelerated quite dramatically,falling from 441 in 1981/82 to 28% in 1982/83 (see Table 1.4). This wasbrought about partly by imposing fairly tight control on the rate of growth ofcredit to both the private sector and public sector companies; but the majorfactor was a decline in the overall fiscal deficit which required a muchreduced access by the treasury to the banking system. Thus, total domesticcredit grew by only 172 in 1982/83 compared with 471 in 1981/82. However, thereason why money supply did not fully reflect the deceleration of domestic

- 16 -

credit was the offsetting ex W nsionary influence of a favorable balance ofpayments outturn in 1982/83.-'

Table 1.4: FACTORS AFFECTING MONETARY EXPANSION(in millions of LE/current prices)

Changes During Period 1980/81 1981/82 1982/83 1983/84 1984/85

Foreign assets (net) 371 -414 1262 28 -124

Domestic credit 1979 5664 3039 4177 4762

Claims on public sector (net) 468 3414 1715 2961 2913Central & local government (net) (-612) (2805) (1140) (1867) (2026)Public authorities (net) (693) (-43) (130) (462) (187)Public se-tor companies (net) (387) (652) (445) (632) (700)

Claims on private sector 1511 2250 1324 1215 1813

Other items (net) -211 -770 -412 -618 916

Money and quasi money 2137 3702 3388 3048 2446Money (659) (1010) (1333) (987) (876)Quasi money (1478) (2692) (2055) (2061) (1570)

Memo items

Growth rate (Z per year)Money and quasi money 34 44 28 20 13Domestic Credit 19 45 17 20 19Public sector credit (net) 5 37 14 21 17Private sector credit (net) 83 68 24 18 22

Source: Central Bank of Egypt

1.46 Although domestic credit picked up in 1983/84, growing by about 20%,money supply growth declined further, rising by only 20% compared with 28% in1982/83 and 44% in 1981/82. The expansionary influence of a more rapid growthof domestic credit on money supply was arrested by the contractionary impactof a deterioration in the balance of payments. It was growth of credit to thepublic sector that caused domestic credit to accelerate. Growth in credit tothe private sector continued to decelerate. Thus, total public sector creditgrew by 21% in 1983/84 compared with only 14% in the previous year. However,the policy to curb private sector credit remained effective in 1983/84,causing a further decline in private sector credit which grew by only 18%.

1/ It is not possible to establish a precise accounting link betweenbalance of payments and monetary developments in Egypt, because of dataproblems related to the utilization of foreign currency deposits.

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The growth rates of both money supply and domestic credit fell in 1984/85, dueto a further deterioration in the balance of payments and a fall in the growthrate of public sector credit. Private sector credit accelerated in 1984/85.

1.47 The chief objective of credit control policy was to curb domesticliquidity and thereby reduce inflationary pressures. Available evidenceindicates that a deceleration of inflationary pressures was indeed achievedthrough 1984. Inflationary pressures have risen since. (See Graph 3).*'However, by imposing the burden of credit control mainly on the privatesector, the authorities seem to have induced a trade-off between inflationcontrol and the growth of private sector activities in the economy. As theGovernment is also imposing severe import cuts on the private sector, byclosing down its normal import channel, it is quite likely private sectorproduction was hurt in 1984/85, and perhaps even fell.

1.48 Domestic interest rates are low relative to domestic inflation and toreturns on holding assets in foreign exchange. Table 1.5 presents the CentralBank discount rate (which is virtually the highest rate in Egypt) in bothnominal and inflation adjusted terms. It is clear that the rate has beennegative in real terms for most of the past ten years. The nominal domesticinterest rate has also been well below the return available on deposits inforeign currency, when the depreciation in the market exchange rate isconsidered. This has contributed to the problem mentioned earlier ofEgyptians holding an increasing portion of their assets in foreign currencydeposits.

Table 1.5: NOMINAL AND REAL DOMESTIC INTEREST RATES1976-1984/85

Interest RateYear Central Bank Percentage Change Adjusted for

Discount Rate in Consumer Price change in CPI a/

1976 6.0 10.3 -3.91977 6.0 11.6 -8.61978 7.0 11.3 -5.31979 9.0 9.8 -0.71980/81 9.0 21.0 -9.91981/82 12.0 16.0 -3.51982/83 12.0 18.6 -5.61983/84 13.0 '19.7 -5.61984/85 13.0 12.3 0.61985/86 13.0 19.3 -5.3

a/ Adjusted using the formula ( 1 + r ) - 1(1 + %& in CPI)

Source: Appendix Tables 6.5 and 12.2

1/ Egypt's consumer price index is an unrealistic indicator of overallinflation in the economy as it is outdated and contains disportionateweights for price controlled goods and services. It is presented here toindicate that inflation slowed at least for those items covered in theofficial index.

Gv#ph 3: Percent Change in Price Index

is

14

12

0

2 12

11

0

1981 De1S2ul 193 P'e'b 103 Sep 1904 Ap I1 No 19% un 1 906,f1

12 * u3 Conumer PI + Wholenale PI

- 19 -

D. Sectoral Developments in Agriculture, Industry and Energy

Agriculture

1.49 Current Performance. Since 1980/81, agricultural output hasstagnated (See Tables 1.6 and 1.10). The production of major crops rice,cotton and sugarcane was lower in 1983/84 than it was in 1979/80. Wheatoutput is below its 1977/78 level. At the same time, demand for agriculturalproducts grew rapidly so that the agricultural trade balance recorded adeficit of U.S. $2.6 billion in 1984/85, not counting imported inputs intoproduction.

1.50 Cotton production, which had increased substantially after 1978 toreach a peak of 539,000 tons in 1980/81, declined to only 398,000 tons in1983/84. The drop in output was a combination of both yield and areadecreases and reflected the rapid rise in costs of production (particularlyin labor) relative to procurement prices. In response, the government hasraised cotton procurement prices by about 28% late in 1984. Although cropestimates for 1984/85 are not final yet, early indications are that areaplanted is up by about 10% and production should rise proportionally. Cerealproduction, which in the early 1980's had also shown a positive response tothe government's renewed efforts to improve varieties and to improvedproducer incentives, has experienced a fall in 1983/84. Wheat production,which was over 2 million tons in 1981/82 has fallen since to 1.8 million tonsin 1983/84. On the other hand, wheat consumption is estimated to beincreasing 5% annually and the official subsidy on wheat and wheat productsis estimated to have been at least $1.2 billion in 1983. The governmentraised the average wheat procurement price by about 20% in 1984.

1.51 Incentives to rice producers have not lagged as far behind the costsof production as cotton and wheat,. However, although rice yields haveincreased through the introduction of an integrated HYV program, output hasremained stagnant at about 2.2-2.4 million tons because of acreagedecreases. Maize production, on the other hand, has experienced steadyincreases in both area and yield, through introduction of high yieldingvarieties. In addition, this trend reflects the higher profitability ofmaize relative to other summer crops because of its use as feed forlivestock. Use of maize for feed has grown rapidly and maize availability isreported to have emerged as a constraint to livestock production. Amongother major field crops, bean production has shown impressive increases (over45% between 1981 and 1985). Procurement prices for beans have kept pace withcosts of production better than wheat, the other major winter field crop.The fruit and vegetables and livestock sub-sectors, which are relativelyuncontrolled, continue to be the most dynamic because of their generallyhigher profitability.

1.52 Although details on all individual crops are not available the broadpicture for 1980-84 that emerges from Tables 1.6-1.8 and the above discussionis that:

(a) the relative profitability of major controlled crops cotton,wheat and sugarcane has deteriorated.

(b) the relative profitability of other important field crops maize,sorghum and rice has remained unchanged.

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(c) the relative profitability of berseem and onions and possiblyother vegetables and fruits has improved.

(d) trends in output and crop mix basically reflect these changes inrelative profitability.

1.53 In comparison to international prices too, the relative depressionof cotton and wheat prices received by Egyptian farmers is apparent.Comparisons of international and domestic prices require appropriateinformation on exchange rates, transport and handling costs and qualitydifferences which are often difficult to obtain. In view of these, Table 1.9and Graphs 4-8 present comparisons for five major field crops in Egypt forwhich adequate information was available. In the case of cotton Egypt's farmprices have been markedly lower than the international price; in 1983/84 theinternational price was two and a half times the domestic procurement price.It should be noted that the demand for Egyptian cotton is not infinitelyelastic and Egyptian exports have a strong influence on world market pricesfor long and extra-long staple cotton, the varieties Egypt exports. Clearlythrough 1983/84, the price paid to farmers has been too low to call forth theproduction needed to supply domestic industry and export the level that willearn Egypt the maximum revenue. The large price increases announced in late1984 encouraged farmers to increase the area planted. The Government shouldkeep a close watch over the cotton procurement price to ensure it does notfall to an unremunerative level and depress cotton production so as to loseworld market share.

Table 1.6: INDICES OF AGRICULTURAL PRODUCTION AND YIELDS(1977/78 = 100)

1978/79 1979/80 1980/81 1981/82 1982/83 1983/841. Production

Wheat 96 93 100 104 103 94Beans 102 92 90 113 128 117Cotton 111 121 114 105 91 91Rice 107 101 95 104 104 95Maize 94 104 106 107 113 119Fruits 114 109 109 137 132 139Red Meat 103 105 106 108 111 113Sugarcane 106 104 106 106 102 101

Overall Agriculture a/ 101 104 109 109 112 112Percentage Change inOverall 2.9 4.8 0.0 1.8 -0.2

2. YieldWheat 95 96 99 105 108 110Beans 98 90 90 98 105 103Cotton 110 115 115 117 109 110Rice 106 107 103 104 106 100Maize 95 104 105 105 110 N.A.Sugarcane 106 102 105 103 101 101

a/ World Bank estimates.Source: Date from Ministry of Agriculture, Department of Statistics

World Bank staff calculations.

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Table 1.7: AGRICULTURAL PROCUREMENT PRICES(annual percent increase)

Average Average1975-79 1980-83 1984

Wheat 6.5 7.0 22.0Rice 12.9 12.7 0.0Cotton 15.7 2.2 28.0Sugarcane 15.6 12.8 0.0Beans 11.4 16.6. 8.1Lentils 19.8 14.4 50.0Onions 12.3 15.0 0.0Groundnut 12.2 7.1 36.1Sesame 22.8 14.2 88.2

Source: Data from Ministry of Agriculture, Department of StatisticsWorld Bank staff calculations.

Table 1.8: COSTS OF PRODUCTION AND PROCUREMENTPRICE CHANGES FOR MAJOR CROPS(Annual Percentage Increase)

1980-83

Farmgate Procurement Cost of ProductionPrice Price I a/ II b/

Wheat 7.7 7.0 17.4 12.3Rice 15.7 12.7 16.5 4.5Cotton 10.1 2.2 22.3 13.6Sugarcane 9.2 12.8 16.6 18.6Beans 8.1 16.6 20.9 16.3Lentils 22.6 14.4 15.3 12.2Onions 21.9 15.0 18.7 15.2Groundnut 15.3 7.1 21.9 23.1Sesame 10.0 14.2 18.3 11.5Sorghum 17.7 - 16.3 15.0Maize 22.7 - 22.3 18.1Berseem 20.1 _ 15.1 12.2

a/ Includes labor costsb/ Excludes labor costs.

Source: Ministry of Agriculture, Department of Statistics.

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Table 1.9: RATIOS OF DOMESTIC FARMGATE AND PROCUREMENT PRICESTO INTERNATIONAL PRICE, 1970-84

Rice Wheat Cotton Maize Sugar CaneA B A B B A B

1970 1.00 0.96 1.50 1.27 0.83 1.06 0.601971 1.09 1.07 1.21 1.14 0.70 1.03 0.511972 0.94 0.94 1.09 1.03 0.71 1.19 0.351973 0.41 0.39 0.59 0.52 0.40 0.62 0.461974 0.34 0.30 0.57 0.52 0.47 0.71 0.181975 0.55 0.55 0.77 0.76 0.62 0.76 0.301976 0.97 0.97 0.80 0.85 0.52 0.78 0.581977 0.96 0.85 1.06 0.98 0.56 1.31 0.781978 0.74 0.73 0.86 0.69 0.50 1.03 0.811979 0.63 0.63 0.55 0.57 0.48 0.73 0.711980 0.57 0.52 0.66 0.60 0.38 1.05 0.281981 0.59 0.51 0.72 0.63 0.40 0.73 0.461982 1.19 0.87 0.69 0.68 0.43 1.09 0.981983 1.14 0.95 0.84 0.75 0.34 1.10 1.021984 n.a 0.95 n.a 0.82 0.41 n.a 1.59

A: Farmgate to International Prices calculated at weighted average exchangerate.

B: Procurement to International Prices calculated at weighted averageexchange rate.

n.a. Not available

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Graph 4: Domestic and International Prices of Wheat

140~

130 -/ ,

120 / " /

110

100

J80

k70

so _

so

40

30

1970 1972 1974 1976 1478 1980 1982

Agricultural Year; Formgote Pr. s lnt-Prl.. Y Procur.Pr.

Graph 5: Domestic and International Pricas of Rice

300-

280 -

240 -

220 -c

0

.S 180 -

120-

100

80

so

40-1970 1972 1974. 1978 1978 1980 1982

Agricultural Yeara rrmgate Pr. 4. Intl. Pr. a Procur.Pr.

- 24 -

Graph 6: Domestic and International Prices of a4ize

170 ;

180 S , 1,0

301970 1972 1974 1976 19`78 t980o 1982

Agricultural Yeara3 Formgato Price + lmetrn. Pr.

Graph 7: Domestic and Tntcrnatlonal Prlce of Sugar Cana

so

90 1

40-

70

80

10

40

1970 18~7,2 19 74. 1876 187`6 1880 1982

Agricultural Yearo Intern. Pr. + Procuroont f.

- 25 -

Graph 8: Domestic and International Prices of Unginned Cotton

140-

130/

120 -. 6

100/

0 9Q0

s0

70-

so

40-

30

20

1970 1972 1974 1976 1ij78 1980 1982

AgrIeultural YearQ Farurmgat. Pr. + Intl. Pr. ° Procur.Pr.

- 26 -

1.54 In the case of sugarcane and rice, domestic prices recently have beenclose to their current internationally traded values. However, currentinternational sugar and rice prices are depressed so that domestic farm pricesfor cane and rice are slightly below their long-run trend values. Maizeprices in the market also are close to their international values. The aboveprice comparisons are ba8ed on a weighted average exchange rate which is aweighted average of the rates in the official, comtercial bank and open marketexchange pools. The divergence of the domestic farm prices from internationalprices would be greater at a shadow exchange rate which takes account of traderestrictions. An indicator of the extent of undervaluation of agriculturaloutput due to overall trade policies is provided in Chapter 3 of this report(see Table 3.11).

1.55 Another interesting feature of the Egyptian agricultural scenereflected in Table 1.8 is the marked increase in labor costs in relation toother production costs. The increase in costs of production inclusive oflabor costs is, in general, higher than the increase without labor costs. Theincreases in labor costs have been felt more significantly for cotton andrice, two crops in which crucial farm operations are relatively laborintensive. The rapid increase in labor costs is a recent phenomenon broughtabout by large out-migration from agriculture to neighboring oil-richcountries and to the fast growing construction and service sectors withinEgypt. In the short-run Egypt needs to address the problem of risingagricultural labor costs. However, in the longer run, with slower growth inthe neighboring countries and in the non-agriculture sectors in Egypt andcontinued rapid population growth, subsidized mechanization policies need tobe avoided.

1.56 Long Term Constraints. Changes in individual crop performancesdescribed above broadly reflect relative profitability of various crops whichin turn are a function of price and subsidy policies as well as underlyingproductivity trends. However, Egyptian agriculture faces increasingconstraints to higher long-term growth. Overall agricultural growthaccelerated sharply in the 1970's (see Table 1.10) due to the cumulativebenefits of the Aswan Dam and the introduction of high yielding varieties, buthas stagnated so far in the 1980's. The constraints to Egyptian agriculture,which have been analyzed in considerable detail in the "Review of Egypt'sMedium-Term Investment Program," can be summarized as: (i) the extremelylimited availability of land and the inability of large public investments innew lands to add significantly to the productive base; (ii) decline in cropyields due to inadequate drainage; (iii) labor shortages due to rapidmigration; and (iv) insti'-tional weaknesses in applied research, extensionand marketing.

Table 1.10: INDEX OF GROSS AGRICULTURAL OUTPUT a"

1964-83 1964-70 1970-80 1980-83 1983-84

Annual Average Growth Rate (%) 3.0 2.6 3.5 2.6 -0.2

a/ Numbers used here are based on Fisher's Index; the geometric mean ofLaspeyre's and Paasche's Index

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1.57 Egypt has taken steps to resolve some of these constraints, thoughnot always very successfully. On the positive side, since 1973, with the helpof four IBRD-funded drainage projects, the government has made considerableinvestment towards a complete and comprehensive drainage system for thecountry. However, well over 50X of the government's ongoing investmentprogram in agriculture is directed at land reclamation. In the past, largepublic land reclamation schemes have suffered from poor management and design,insufficient ancillary services (e.g. drainage), and uncritical selection ofreclamation sites. There is very little evidence that future land reclamationefforts would fare better. Another large proportion of expenditure isearmarked for the rehabilitation of the Nile barrages and Aswan. Besidesexpenditure on land reclamation and on Aswan and the Nile barrages which werenot part of the agricultural development program during the 1970's, theproportion of public investment allocated to agriculture is smaller than ever.

Industry

1.58 Background and Past Performance. As of 1981/82 the industrial sector(manufacturing and mining only) in Egypt accounted for 162 of GDP, 101 oftotal commodity exports and 121 of total employment (see Table 1.11). Thedecline in industry's share of GDP and exports partly reflects a surge in thepetroleum sector's activity in Egypt, but it is also because the industrialsector has not performed a lead role (see Table 1.12). Industrial value-addedachieved fairly large growth but services (trade, finance, government andprivate services) grew faster. Manufactured exports in particular performedvery poorly, declining rapidly in the late 70's.

Table 1.11: RELATIVE IMPORTANCE OF INDUSTRY IN THE EGYPTIAN ECONOMY(In percentages)

1960/61 1973 1981/82

Share of total GDP (at factor cost) 20.1 18.7 16.2Share of total commodity exports 20.0 31.6 10.0Share of total employment 10.0 12.6 12.7

Source: (a) World Bank, Report No. 4498-EGT, Arab Republic of Egypt: CurrentEconomic Situation and Growth Prospects, October 1983;

(b) Mabro and Radwan: The Industrialization of Egypt, 1939-1973,Claredon Press, Oxford, 1976.

Table 1.12: RELATIVE PERFORMANCE OF THE INDUSTRIAL SECTOR(Average real growth rate per annum)

Industrial Non-oil Services ManufacturedValue-added GDP Value-added Exports

1953/54 - 1963/64 7.2 7.2 5.0 5.61963/64 - 1974 3.9 4.1 4.0 5.01974 - 1979 7.1 8.3 11.3 0.51979 - 1981/82 9.2 7.9 10.1 -20.0

Source: a) Mabro and Radwaus, op. cit.,b) Khalid Ikram: EGYPT, Economic Management in a Period of

Transition, Johns Hopkins Press, Baltimore, 1980.c) World Bank Report No. 4498-EGT.

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1.59 Egyptian policy makers did recognize the need for industrialdevelopment. Egypt has invested, over a long period of time, a sizeableamount of resources in the industrial sector (see Table 1.13). But thereturns to these investments have been low due to intermittent periods of lowcapacity utilization. Moreover, a diversified and efficient industrial basecapable of competing effectively in the world market did not emerge.

Table 1.13: SHARE OF INDUSTRIAL INVESTMENT IN TOTAL INVESTMENT

Industrial Invst. Total Invst.as a percentage as a share

of total investment of GDP

1953/54 - 1962/63 26.0 15.41963/64 - 1973 27.0 17.41974 - 1981/82 24.0 25.4

1.60 Before the 'opening-up' in 1974, Egyptian authorities sought tofoster industrial development mainly through public enterprises. The role ofthe private sector was small. Following the liberalization policy in 1974,private industrial activities gained considerable momentum. Privateindustrial investment increased from only 42 of total industrial investment in1973 to 24% in 1981/82. Consequently, the private sector's share in the valueof industrial output increased from 172 to 32% over the same time period.

1.61 Major public industrial enterprises also experienced high rates oftotal factor productivity growth during the liberalization phase (seeTable 1.14). Capacity utilization contributed most to this improvement.Balance of payments difficulties prior to the 'opening-up' had caused a rapiddecline in the utilization of industrial capacities. The surge in theavailability of foreign exchange after the 'opening-up' enabled importation ofkey industrial raw materials and spare-parts which vastly improved capacityutilization. The initial boost gained further momentum as domestic demandexpanded following rapid increase in income primarily based on petroleum, Suezand remittance earnings. However, despite productivity improvements Egypt'sindustrial efficiency has suffered significantly due, among other factors, towrong selection of industrial projects. (See Table 1.15).

1.62 The domestic resource cost (DRC) measure indicates that the broadranking of activities in terms of comparative advantage is as follows: foodprocessing, textiles, metals and chemicals. New investments concentratedmostly on metals and chemicals, activities in which Egypt does not havecomparative advantage. Of course, in a dynamic context, productivity gainscould offset the lack of comparative advantage at any point in time.Productivity improvements, as illustrated in Table 1.14, were indeed large anddid contribute towards offsetting the negative impact of undertakinginvestments in which Egypt lacked comparative advantage. In some cases thesegains were large enough to offset the lack of efficiency at the initialstages. But in many cases, particularly investments pertaining to basicchemicals, metals and transport equipment, productivity gains were notsufficient and these projects have remained inefficient.

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Table 1.14: TOTAL FACTOR PRODUCTIVITY ANALYSIS FOR PUBLICINDUSTRIES UNDER MINISTRY OF INDUSTRY - 1973 TO 1981/82

(In percentage)

MetallurgicalTextiles Food Chemicals and Engineering

Growth Rate ofValue-added 4.90 7.50 12.70 9.30Labor input 1.50 1.40 5.80 4.30Capital input 1.20 1.30 3.40 5.10

Total Factor ProductivityChange 3.54 6.15 8.71 4.51

Contribution to Value-addedGrowth by:Labour input 17.0 18.0 15.0 18.0Capital input 11.0 10.0 18.0 33.0Total factorproductivity change 72.0 82.0 67.0 49.0

Source: Data provided by Ministry of Industry; calculations by World BankStaff.

Table 1.15: MEASURES OF STATIC EFFICIENCY OF PUBLIC SECTOR INDUSTRIES

DRC (Agaregate)Historical Cost Replacement Cost ERP

ARI = 6% a/ ARI - 101 a/ Overall

Textiles:Cotton textile 0.629 0.889 -28.10Other textile 0.994 1.281 35.47

Food:Edible oils 0.566 0.843 -93.97Manufactured food 0.314 0.516 -69.73Alcohol, beverage,tobacco 0.395 0.562 4.61

Chemicals:Paper 1.714 2.803 88.90Basic 1.938 3.457 45.35Miscellaneous -0.651 -1.156 NVAWP b/

Metals:Basic metals -27.558 -45.146 NVAWP b/Transport equipment -6.431 -8.467 NVAWP b/Electrical machinery 0.591 0.800 9.30China and glass -3.931 -5.431 NVAWP b/

a/ ARI = accounting rate of interest.b/ Negative value-added at world prices.

Source: World Bank, Report No. 4136-EGT, Arab Republic of Egypt: Xssues ofTrade Strategy and Investment Planning, January 1984; pp.280, 294

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1.63 The investments in high cost activities were sustainedthrough a policy of distorted incentives. High rates of effectiveprotection were accorded to activities in which Egypt lacked comparativeadvantage. The incentive structure also imparted a serious bias againstexports. The gains from these incentives accrued in terms ofmobilization of private (domestic and foreign) resources in industrythrough the open-door policy have tended to be offset by losses due toinefficient investments in the private sector based on wrong signals.Finally, public industrial enterprises' financial 2osition deterioratedfairly rapidly. (See Table 1.16). The growth in physical productionwas achieved at high budgetary cost to the Treasury.

Table 1.16: FINANCIAL RATE OF RETURN IN MAJOR PUBLIC SECTOR INDUSTRIES a/(current prices)

1974 1976 1979 1980/81 1981/82P K R/R P K R/R P K R/R P K R/R P K R/R

Textiles 103 525 19.6 81 691 11.7 114 1240 9.2 130 1427 9.1 89 1642 5.4Food 31 300 10.3 36 405 8.9 70 16 9.8 64 825 7.8 48 944 5.1Chemicals 44 355 12.4 42 507 8.3 52 1005 5.1 81 1183 6.8 116 1342 8.6Eng. andmetals 48 490 9.8 74 788 9.4 134 1540 8.7 157 1761 8.9 156 1989 7.8

AverageR/R 235 1681 14.0 234 2392 9.8 371 4502 8.2 433 5197 8.3 409 5907 6.9

P = Gross Profit; K = Gross Capital; R/R = Rate of Return

a/ Capital is based on revalued physical assets (includes only fixed investment).Depreciation allowances are added back to capital and profit to obtain theappropriate measure of financial rate of return for public enterprises.

Source: Data provided by Ministry of Industry.

1.64 Another major concern from the standpoint of employmentgeneration is the low absorption of labor force in the industrialsector. The rate of growth of industrial employment has generallytended to lag behind the growth of industrial value-added (seeTable 1.17). The employment elasticity of output improved slightly from0.81 during 1954-1964 to 0.83 in 1964-1970, but fell to 0.68 only in1973-1981/82. Egyptian industry has employed surplus labor for decadesand the low increases in employment may simply reflect the absorption ofalready employed labor into more productive activities.

- 31 -

Table 1.17: ABSORPTION OF LABOR IN INDUSTRY(in percentages)

Growth of Growth of EmploymentEmployment Value-added Elasticity of

of output

1954-1964 5.8 7.2 0.811964-1970 2.5 3.0 0.831973-1981/82 5.0 7.4 0.68

Sources: (a) Mabro and Radwan(b) Khalid Ikram(c) Ministry of Planning and Ministry of Industry

1.65 Numerous policy induced constraints explain the poor performance ofpublic enterprises in Egypt in respect of export earnings, the efficiency ofindustrial investments, generation of public savings and labor absorption.Exchange rate and trade policies have exerted a systematic bias againstexports. Pricing and trade policies have combined to promote the expansion ofinefficient activities at the expense of efficient activities. Pricing policyhas also caused a substantial deterioration in the financial performance ofpublic industrial enterprises. The adverse impact of pricing policy onindustrial firms was further exacerbated by financial management policies.Moreover, labor policies induced a gradual deterioration of the quality oflabor force in public industries, imposed additional constraints on themanagement's control by severely limiting their power to weed out inefficientlabor performance. A general overstaffing contributed to the weakening offinancial performance.

1.66 Policies towards the peivate sector have been relatively morefavorable. The policy of liberalization, particularly Law 43, contributed tothe significant growth achieved by private enterprises. However, theinfluence of policies on the overall incentive structure has also induced aconcentration of private industrial activities in inefficient lines ofproduction. Finally, the low responsiveness of employment to output growthreflects the impact of a whole host of factors. These include the rigiditiesimposed by the labor laws, the employment drive of 1961-62 which resulted inan initial redundancy of labor in public enterprises, the public sectorinvestment program which fostered a faster development of relatively capitalintensive activities, and over-valued exchange rate and low real interestrates.

1.67 Current Developments. Unfortunately, a comprehensive and reliabledata series on the performance of the whole industrial sector in the recentyears is not available. We have constructed a picture based mainly on datacovering enterprises under the jurisdiction of the Ministry of Industry.",Our estimates show a declining trend for industrial output since 1981/82 (see

1/ The methodology and coverage are explained in detail in Industrializationin Egypt: Performance and Policies, Egypt Division, World Bank, October1984.

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Table 1.18). Also, industrial employment has been growing much slower than inthe 1973-81/82 period. However, manufactured exports picked up noticeablygrowing by 13b and 15% in 1982/83 and 1983/84 as a result of improvedincentives compared with a decline by 222 in 1981/82.

Table 1.18: RECENT INDUSTRIAL DEVELOPMENTS(In percentage, annually)

Growth rates: 1973-1981/82 a/ 1981/82 a/ 1982/83 b/ 1983/84 b/

Value-added 7.4 10.6 7.2 6.0Exports -1.0 -22.0 13.0 15.0Employment 5.0 2.6 2.6 2.6

a/ Actualh/ Estimated

Source: Ministry of Industry.

1.68 The recent slowdown of industrial output appears to be mainly due toa decline in capacity utilization in public enterprises. As already noted,the foreign exchange situation is very tight and will become tighter in thefuture. This has caused a reduced allocation of foreign exchange from thecommercial bank pool for the purchase of intermediate imports. As aconsequence, many public enterprises have been forced to seek foreign exchangefrom the open market at a much higher price. This and other cost pushpressures, including wages growing faster than product prices, have induced aserious financial constraint on the operation of public enterprises, therebyimpinging on their ability to procure raw materials, imported and domestic,and causing a reduction in capacity utilization and hence a deceleration ofindustrial output.

1.69 The tight foreign exchange situation has reportedly also adverselyaffected the output performance of the private industrial enterprises. Thenumber of items requiring clearance prior to importation have increasedprogressively. This has made licenses both difficult to obtain as well aslengthened the clearance procedure once licenses are issued.

1.70 A further deterioration in the balance of payments that is projectedfor 1985/86 will have an even stronger adverse impact on industrial output.Our current estimates indicate that industrial value added grew by about 5% in1984/85 due to a lack of complementary imports. The resolution of the presentbalance of payments crisis is, therefore, crucial for reversing the decliningtrend in the growth of industrial output. In the short run, additionalforeign aid inflows can provide some relief. However, the long-term prospectswill depend mainly on instituting an appropriate policy environment.

1.71 Recent Changes in the Policy Environment. The Five Year DevelopmentPlaa (1982/83-1986/87) recognized the need to strengthen the performance ofthe industrial sector, for which it set very ambitious targets. Industrialoutput was projected to grow by an average of 9.52 per year, employment by

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5.52 annually and exports by over 10 per annum. A number of policyinitiatives were undertaken to achieve these targets. First, a new law (Law97/1983) aimed at reforming public enterprise management practices was enactedin July 1983. Second, beginning in April 1983, measures were taken toencourage the development of manufactured exports. Finally, during1983/84-1985/86 the prices of selected publicly produced goods have beenraised relatively to improve the financial position of the concernedenterprises.

1.72 The most important policy measure so far has been the initiation of aprogram for the development of manufactured exports. The main components ofthis program are: (a) allowing industrial exporters to retain 100% of theirexport earnings, (b) establishment of an export development bank, (c) certaininstitutional changes involving improved technical capabilities of the ExportPromotion Center and (d) establishment of an inter-ministerial committee tosimplify import and export procedures including streamlining of the 'TemporaryAdmission Procedure' which allows exporters to import inputs for exportproduction on a duty-free basis.

1.73 There are indications that the change in the exchange rate policy hasalready provided a significant impetus to manufactured exports. For example,the higher growth rates for manufactured exports realised in 1982/83 and1983/84 mainly are due to this improvement in exporter incentive. However,given the low base, the 4ncrease in manufactured exports did not have anoticeable impact on either the total availability of foreign exchange or onthe industrial output. Moreover, the present export base is quite narrow (seeTable 1.19). Thus textiles contributed most to this improvement inmanufactured export performance. Other non-traditional exports, such anengineering goods have been slow to respond.

Table 1.19: THE STRUCTURE OF MANUFACTURING EXPORTS a/(in percentages)

1981/82 1982/83 1983/84

Textiles 45.6 46.2 48.6of which: yarn (30.2) (31.1) (33.1)

cotton textiles (5.9) (5.7) (8.0)other textiles (9.5) (9.4) (7.5)

Foodstuff 11.2 10.0 5.8Chemicals 4.1 9.5 11.6Metals and Engineering 34.1 36.1 27.5Others 5.0 9.3 6.2Tota. 100.0 100.0 100.0

Memo ItemsManufacturing exports as ashare of total exports 9.3 11.7 12.4

a/ Exports expressed in current EE terms.

Source: CAPMAS

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1.74 The pricing policy of the Government remains unchanged in principle.However, in practice the prices of many publicly produced industrial goodshave shown less rigidity than is implied by the announced policy. The currentpractice is to let the prices of commodities which are politically lesssensitive move up until consumers start protesting. For commodities which areconsidered politically sensitive and whose price increases need cabinetapproval, the general policy is to allow increases only if the lossesaccumulated by the concerned enterprises are considered unmanageable (i.e. therefusal of the Treasury to bail out, or notice from the commercial banks thatno further over-draft will be allowed). The commodities for which prices wereraised recently based on this consideration include cigarette, cement andcoke. The prices of cement and cigarette were raised by about 50 and 35%respectively effective July 1, 1984. The price of coke was raised by over200% effective January 1, 1985. Cigarette prices were raised again in March,1986. These price increases are expected to eliminate the current operatingdeficits of the producing companies. In addition to these, there areindications the Government has raised other key prices, including sometextiles, foodstuffs and metals, for which details are not available.

1.75 The other area where the authorities have made some progress isregarding the management of public enterprises. Although the newly enactedPublic Sector Reform Law does not seek to ensure full autonomy to publicenterprises, there are certain provisions in the new law which, if implementedappropriately, augur well for an improvement in the future performance ofpublic enterprises. These include provisions for labor mobility, addedflexibility for public enterprise managers in day to day operations and betterlinkage between performance and the reward system. Two important stepstowards increased autonomy have already been taken. These are, the transferof responsibility for the overall supervision of enterprises from the Ministryto the public sector organizations (PSO) and the elimination of therequirement for public companies to hire labor under the gauranteed employmentprogram. The Government is now working on the formulation of guidelinesdefining the responsibility of the PSOs, the relationship between PSOs andCompanies and the relationship between PSO's and the concerned Ministry-L

1.76 The policy changes implemented so far are all in the rightdirection. However, they do not constitute a comprehensive and adequateprogram of actions that is needed to ensure a substantial improvement in theperformance of the industrial sector. A long-term solution to Egypt'sdevelopment needs will require the establishment of an efficient anddiversified industrial base capable of competing effectively in theinternational market. A flexible exchange system is a crucial requirement inthis respect. But there are many other policies that need to be implementedsimultaneously. Thus, a package of policy reforms should include a flexibleexchange system, a tariff structure and trade regime which has minimumanti-trade bias, full price flexibility and full autonomy to public enterprisemanagers in all operational decisions including investment, employment andwage setting. So far there is little indication that a comprehensive programof actions will be launched in the immediate future.

1/ The Ministry of Industry has asked for Bank advice in undertaking thesetasks and also in devising a system of performance evaluation and rewardsystem.

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Energy

1.77 Egypt is an energy surplus country that has encouraged the very rapidgrowth of domestic consumption through low and falling real energy prices.Hydro-electric production from the Aswan High Dam exceeded Egypt's power needsuntil the mid-1970s. Oil production began to rise rapidly in the early 1970sand by the middle of the decade, Egypt became a significant net exporter.Since then, oil exports have grown rapidly in volume terms and, until oilprices started to fall in 1980, even faster in US dollar terms. In the late1970s, Egypt began to exploit its very substantial reserves of natural gas,which substitute for oil products in many uses. This energy abundance hasallowed the Government to keep energy prices very low, now about one-third ofeconomic prices--that is, world market prices for petroleum products and longrun marginal costs for electricity. Graphs 9 and 10 depict the changes inreal energy prices over time.

1.78 The management of these energy resources has become critical to theeconomy's future development. The subsidies, explicit and implicit, involvedwith keeping domestic energy prices below their economic levels certainlyexceed the total fiscal deficit, now over 20% of GDP. The low prices, byencouraging the rapid growth of energy consumption, require a correspondingrapid growth of investment to develop the huge increments of energy theeconomy is absorbing. Growth of demand for both power and petroleum have muchexceeded 102 per annum from 1974 to 1984, although this has slowed recentlyalong with economic activity.

1.79 Oil and Gas. Egypt continues to benefit from the development policyit has pursued over the last twenty years in the oil sector. Exploration byforeign private oil companies remains high and proven reserves are stillrising, though not at the heady pace of the 1970s. Oil production has morethan quadrupled over the past decade, supplying the rapidly growing domesticdemand while allowing exports to rise apace (see Graph 11). During 1983/84,crude petroleum output rose 13% (an unusually high increase), domesticconsumption of petroleum products rose 10% (an unusually low jump) and crudeoil exports rose 12Z (see Table 1.20). In 1984/85, production rose by 121while consumption rose by 6%. Crude exports fell by 5% in 1984/85 due to lowsales in the final quarter of the fiscal year, when Egypt was slow in loweringits sale price to follow the market price downward. This left Egypt with someexcess crude in inventories, which they were able to sell in the first half of1985/86. Production was also high during that period and consumption waslow. Egypt exported a much increased volume in the last half of 1985. SinceJanuary, 1986, Egypt has cut production by roughly one-third in response tothe fall in the price of oil in international markets. Since May, 1986,production and exports have fluctuated.

1.80 Two forces place the great benefit Egypt has enjoyed from oil injeopardy--the continued fall in international oil prices and the relentlessgrowth of domestic consumption. Both threaten to erode the very substantiallevel of foreign exchange and public resources provided by oil in the past.Egypt's weighted average export price for crude petroleum fell from US$34 abarrel in 1980/81 (its peak) to US$30 in 1981/82, to US$28 in 1982/83, toUS$27 in 1983/84 and in 1984/85. Following a precipitious fall to between

- 36 -

Graph 9: The Real Price of Petroleum & Fuels 1/

3 :0

78-

- 70 two

1/ The wholesale price index of petroleum and fuels deflated bytotal wholesale price index, excluding petroleum and fuels.

Graph 10: The Real Price of Electricity7-

is ,a~~~~~~~a

- 37 -

Graph 11: Petroleum Summary

4,

'so

64 1

10

C,.i. Pied. t Sa. c.n 9 Mued 3.p.T.L)

- 38 -

Table 1.20: EGYPT - PETROLEUM SUMMARY

1980/81 1981/82 1982/83 1983/84 1984/85 1985/86ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL ESTIMATED

Crude Petroleum - Mn tonsProduction of Crudt oil 31.0 32.5 34.5 39.1 43.7 42.2Exports 15.9 17.0 17.6 20.7 22.2 23.4

Refined Products--Mn. tonsDomestic Production 13.5 14.8 16.7 17.4 19.0 19.6Imports 1.0 1.5 1.8 1.9 1.8 1.4Exports 2.3 3.0 2.8 2.6 3.1 3.8Domestic Consumption 11.9 13.4 15.3 16.8 17.9 17.3

Foreign Trade-U.S.$ MnCrude Exports 3869.7 3940.5 3538.2 3977.3 4327.5 3741.1Egypt 2559.7 2600.5 2181.2 2402.3 2263.5 1743.9Foreign Companies 1310.0 1340.0 1357.0 1575.0 2064.0 1997.2

Products Exports 619.6 728.8 627.2 562.3 627.5 607.1

Total Exports 4489.3 4669.3 4165.4 4539.6 4955.0 4348.2

Products Imports 335.0 505.0 493.0 514.0 424.2 254.1

Crude Export Price (US$/bb) 33.6 30.9 28.0 27.0 27.0 22.2

Annual Percentage Change

Crude Petroleum VolumeProduction of Crude Oil 11.0 4.8 6.2 13.3 11.8 -3.4Exports 15.2 6.9 3.5 17.6 7.2 5.4

Refined Products, VolumeDomestic Production 16.4 9.6 12.8 4.2 9.2 2.9Imports 233.3 50.0 20.0 5.6 -5.3 -22.2Exports 35.3 30.4 -6.7 -7.1 19.2 -21.0Domestic Consumption 9.4 12.6 14.2 9.8 6.5 -3.4

Foreign Trade--U.S. $ ValueCrude Exports 60.1 1.8 -10.2 12.4 8.8 -13.6Egypt 74.1 1.6 -16.1 10.1 -5.8 -23.0Foreign Companies 38.3 2.3 1.3 16.1 31.1 -3.2

Products Exports 51.7 17.6 -13.9 -10.3 11.6 -3.3

Total Exports 58.9 4.0 -10.8 9.0 9.2 -12.2

Crude Export Price (US$/bb) 14.7 -8.0 -9.4 -3.6 -0.0 -17.8

Source: Egyptian General Petroleum Corporation and World Bank staff estimates.

- 39 -

US$12 by May, 1986, we project the price to fall further, to US$22 on averagein 1985/86. These price falls have caused the value of Egypt's crude exportsto fall below its 981/82 peak in the ensuing years, despite major rises incrude export volume. The fall in the value of crude oil exports in 1985/86and 1986/87 will be very sharp.

1.81 As was seen in Graph 9, the real domestic price of petroleum productshas fallen steadily for the past 15 years. This, along with the rapid rise inincome, has caused domestic demand for petroleum to accelerate over time andto reach quite high growth rates through 1983/84 (see Table 1.21). The growthrates slowed in 1984/85, and turned negative in 1985/86 due to the lowergrowth in the economy. Despite the recent fall in the international prices ofpetroleum products, Egypt's prices are on average about one-third of borderprices. These low prices have led to wasteful use of petroleum products andhave diverted exports to the domestic market.

1.82 Natural gas potential is a long-run solution to the trade-off betweendomestic consumption and export of petroleum. Natural gas, which isrelatively abundant in Egypt, at least at its current low utilization rates,can substitute for several petroleum products in domestic consumption,particularly for fuel oil. Table 1.22 presents data on natural gas productionfrom 1980/81 through 1985/86. Production has risen quite rapidly recently andis expected to continue its rapid rise in the future. The development of itsnatural gas reserves is Egypt's most urgent development task, given itsimmediate payoff in oil exports. The Government has recently taken a majorstep to encourage foreign oil companies to mobilize their resources to findand develop natural gas by offering to compensate the companies for any gasthey find on the basis of the international price for fuel oil. Although allexploration activity for hydrocarbons is depressed by the currentinternational price for oil, this agreement should eventually pay off insubstantial additions to Egypt's natural gas production.

Table 1.21: RATES OF GROWTH OF MAJOR PETROLEUM PRODUCTS CONSUMPTION(in X per annum)

1952- 1960- 1970- 1980/81-1960 1970 1980(81 1982/83 1983/84 1984/85 1985/86

Total PetroleumProducts 5.7 2.1 7.4 12.8 9.8 6.6 -3.2

Gasoline & Naphtha 0.5 5.4 10.7 11.1 11.4 9.1 4.7Kerosene 1.3 1.1 6.3 10.5 7.5 6.7 4.4Gas Oil/Diesel 10.9 4.1 8.3 10.6 12.5 9.2 -9.7Fuel Oil 5.9 0.8 5.9 13.7 7.9 4.6 -5.2

Source: Egyptian General Petroleum Corporation

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Table 1.22: NATURAL GAS PRODUCTION(in thousand metric tons)

Production1980/81 1981/82 1982/83 1983/84 1984/85 1985/86

Area Actual Actual Actual Actual Actual Projected

Abu Madi 625 651 715 795 938 1318Abu Gharadig 790 825 790 798 907 754Abu Qir 395 448 649 767 798 1261Sinai 0 0 0 0 0 118Gulf of Suez 0 0 40 369 536 452Total 1810 1924 2194 2729 3179 39032 Change 6.3 14.0 24.4 16.5 22.8

Source: Egyptian General Petroleum Corporation

1.83 Power. From the completion of the Aswan High Dam to the mid-1970s,power generating capacity was in excess of demand. After 1974, high rates ofgrowth of demand--13% per annum between 1974 and 1981/82-not only used up theremaining excess capacity but also required the rushed installation of thermalgenerating capacity, particularly combustion turbine plants, which have lowfuel efficiency. The high rates of growth of demand reflected the fast growthof the economy, the low and declining real energy prices, the incr-asingelectrification of the economy, and the introduction of large-scale aluminumsmelting. Graphs 12 and 13 present the development over time of plantcapacity and generation by type.

1.84 By 1982, in some seasons load shedding and power blackouts werecommon and maximum demand exceeded supply at times during the day. Graph 14shows the ratio of peak demand to installed capacity. Recent improvements aredue to the commissioning of new capacity, mainly at the Shoubra El Kima powerstation. The use of refined petroleum products to generate electricity hadrisen substantially from about 1 million tons of oil equivalent in 1975 toover 3 million tons by 1981/82 an average increase of 23% per annum. The maindevelopment task in the power sector is to slow the rapid rate of growth ofpower demand, adequately provide for the (moderated) demand through increasesin efficient generating capacity and substitute economically more efficientfuels for the more expensive petroleum products. It also needs to becomefinancially viable and, in this way, generate an important share of theresources needed for investment.

E. Short-Term Economic Outlook

1.85 Egypt now faces the prospects of a foreign exchange crisis. In thelast year, as set out in the preceding sections of this Chapter, the majorsources of external funds have fallen. In the short run, Egypt will need tosharply curtail imports in order to avoid further increases in paymentsarrears. Domestic savings will also fall in the short-term unless newmeasures are taken, because much of the impetus to past growth in publicsavings-again, worker remittances, petroleum exports and Suez Canalearnings--will either fall or grow less rapidly. As a result of the decline

- 41 -

Graph 12: Total Capacity by Type

7.ao

0~~~~~~~~~~~~~~~~~~~~~o 0

X,,

t tZ0 t lulla ~ ~~~~~~~~~~~10 lO l@@ 0@

Graph 13: Total Energy Generated by Type

30-

is

14-

5~

a X1319

10~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0

4 0~~~~~~~~~~~~~~~~~~~~1 0S~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0

o C 0

3~~~~~7 T=wIB=

- 42 -

Graph 14: Peak Load versus Total Capacity

0.0*-

0. -

0.0

0.4

0.8

to"O 1I0s"6 18 log IP6 1960 1064

yJ'

- 43 -

in the sources of external funds, the country's importing capacity defined ascurrent account receipts deflated by the import price index falls sharply (seeGraph 15). In 1985/86 and 1986/87 it declines by 11.6X and 12.41 respectively.

1.86 The decline in import capacity will lead to sharp cuts in the growthof output and consumption. Although official statistics are not yetavailable, GDP growth in 1985/86 is estimated to be in the range of 31-41 perannum, compared to an average growth of 5% per annum in the previous twoyears. In 1986/87, without policy changes GDP growth is projected to declinefurther. The adverse effect on consumption is large; consumption falls by1.11 in 1985/86 and 3.01 in 1986/87.

1.87 Egypt's only viable option is to introduce major economic reforms,which in the past have been piecemeal and insufficient despite recognitionwithin sections of the Government on the urgent need for policy changes. Theeconomic reforms are needed not only to restore the economy to a sustainablegrowth path in the medium-term, but is also a precondition for enlistingsupport for restructuring the maturity of Egypt's debt. Without this, thehigh and rising debt service payments mean the gross financing gap will riseto over US$4.4 billion in 1986/87 (see Table 1.23). Even if a very drasticcut in imports was manageable--so that imports fall at an annual rate of 4%from FY85 to FY90--Egypt will be unable to meet its debt service obligations.The debt service ratio still rises to 62.3% by FY89.

Table 1.23: RESOURCE GAPS WITH DRASTIC IMPORT CUTS a/ BUT WITHOUT DEBT RELIEF(NO POLICY CHANGES)

(In million of US dollars)

1984/85 1985/86 1986/87 1987/88 1988/89

Current Account Balance -3586 -3559 -3113 -2988 -2521(1 of GDP) (-11.8) (-11.0) (-10.4) (-11.2) (-9.5)

Autonomous Capital Inflows 2728 2685 470 641 --579Change in Reserves 0 802 -1176 -37 -46Net Gapfill 0 0 3819 2111 2149Change in Arrears 1300 700 -2000 0 0Gap Financing Required 0 0 3819 4021 5114Debt Service Ratio (X) 34.7 41.7 65.3 60.2 62.3

a/ Imports in constant dollars fall at an annual average rate of 4% per annum.

Source: World Bank

1.88 In the past two years, Egypt has lived with its balance of paymentscrises by increasing arrears and by drawing upon the counterpart of foreigncurrency deposits of its residents. The latter policy has seriously increasedthe vulnerability of its banking system, whose net foreign currency exposurein December 1985 amounted to US$2.7 billion as against US$1.4 billion in June1984 (see Table 1.24). It is unlikely that these options can be pursued muchfurther. Egypt, tharefore, has little choice but to introduce economicreforms which may seem very rapid in comparison with past actions but would

- 44 -

Graph 15: Import Capacity without Policy Changesca", t A . VOWU$ S

l-

a. . .

3

a.0I-3

a OW VWIo ~

*~ ~~~~~ o

- 45 -

constitute a necessary package in view of Egypt's short and medium-termneeds. Delays in introducing some of these reforms over the last severalyears have made the need for rapid policy changes critical. The next chapteroutlines the nature and degree of policy reform needed.

Table 1.24: COMMERCIAL BANK'S NET FOREIGN CURRENCY LIABILITIES, 1981-85(In million US dollars)

June June June June June December1981 1982 1983 1984 1985 1985

Total 211.1 1122.0 579.9 1404.0 2179.0 2682.1

Of Which Residents 1944.1 1942.0 2233.9 2726.0 3483.0 3885.3

Non-residents -1733.0 -820.0 -1654.0 -1322.0 -1304.0 -1203.2

Source: Central Bank of Egypt

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CHAPTER II

AGENDA FOR ECONOMIC REFORM

2.1 Objectives: The broad objectives of the current five year plan foradjustment of the economy remain largely valid despite the deterioration inthe external environment now facing Egypt. Although the unanticipatedstagnation in foreign exchange earnings has meant that the rate of saving andinvestment has been lower than planned and hence the rate of growth of totaloutput has slowed, the goals of raising domestic saving, reducing dependenceon foreign saving, emphasizing domestic commodity production, making exportsgrow faster than imports, reducing consumption to allow more investment andstimulating private investment to grow faster than public investment are allthe more necessary now. The need is to formulate and put into effect avigorous program of policy reform consisting of specific measures to achievethe objectives contained in the plan, cognizant of the fact, however, that thecurrent economic situation is less favorable than when the plan was formed.The required measures are fairly comprehensive and far reaching; they can begrouped under three broad headings: fiscal and monetary policies; balance ofpayments and foreign trade policies; and policies to improve the productivityof both the public and private productive sectors.

Fiscal and Monetary Policies

2.2 Egypt's overall budget deficit of over 20%L' of GDP in the past fewyears, requiring borrowing from the banking system of 6%-10% of GDP, isexcessively expansionary and is the root cause of many of the macroeconomicproblems. The large fiscal deficits reflect both the growing inelasticity offiscal revenues and the high rate of public spending.

2.3 The large public sector deficits have created both excess demand forimports and fueled domestic inflation. A significant part of the currentaccount balance of payments deficit can be related to the imbalance in thebudget resulting directly from the large import component of the subsidizedconsumption and the public investment program and indirectly from the fiscalstimulus making aggregate demand exceed domestic supply. At the same timedomestic inflation, fed by large expansionary financing of the budget deficit,has been considerably higher than international inflation and this has led topressures on the market exchange rate. A substantial reduction in the overallbudget deficit accompanied by elimination of reliance on borrowing from thebanking system, is among the most urgent policy actions required forimprovement in the balance of payments and restoration of confidence in thecurrency.

2.4 Specifically, the gross budget deficit must be reduced to no morethan 15% of GDP in 1986/87, with a corresponding contraction in domestic bankfinancing. This target is slightly higher than the budget deficit target set

1/ If anything, the fiscal deficits as a proportion of GDP are under-stated because most government imports enter at the preferentialCentral Bank exchange rate (rather than the market exchange rate) andtotal government imports greatly exceed the foreign exchange revenuewhich is accounted for at the Central Bank rate.

- 47 -

in the 1985/86 budget (14% of GDP). However, the outcomes for 1984/85(overall deficit of 23.5% GDP notwithstanding build-up of arrears of LE 450million and a bank financing of the budget of 9.7% of GDP with another 22 ofGDP borrowed by the Supply Authority) were considerably worse than anticipatedat the time of formulation of 1985/86 budget. This means that 1985/86 budgetmeasures, even if fully implemented, would not have achieved these targets.In fact only a portion of the intended measures have been implemented.

2.5 The immediate priority should be: (a) increases in energy prices toput Egypt firmly on the path to removing the gap between present and economicenergy prices by 1992; (b) increasing selected industrial prices to correctdistortions and improve the financial performance of public sector companies;and (c) substantial progress toward the long-standing goal of restrictingoverall direct subsidy expenditures to LE 2 billion. The energy pricemeasures in the 1985/86 budget"' were not fully implemented in the sensethat not all price actions proposed were taken and not all final consumers arepaying the higher prices that have been decided. Similarly, restricting theexpenditures of the authorities and companies that channel subsidies toconsumers to the amount budgeted has been inconsistent with the price policiesthey have been instructed to follow with the result the distributing agencieshave had to borrow from the banking system or build up arrears in otherpayments to make ends meet.

2.6 A fundamental problem in Egypt is that because of the very largepublic sector presence, the first round effect of remedial measures falls onthe budget itself. For instance, unless the public sector agencies consumingenergy pass on the price increases to the ultimate consumer or are able tooffset the effect of these increases through efficiency improvements, there isno real improvement in the budget. Raising public sector prices andgovernment service user charges again raises the issue of carrying themthrough to the ultimate consumer. When formulating the budget it is importantto remember that price raising measures do not automatically translate intoadditional revenues in the first instance. Some price increases are neededsimply to cover the increases in production costs and secondly some of theeffect is to raise prices to other public sector entities. There is also thedanger if these measures are only partially carried through, public sectorcompanies may resort to arrears in payments to other public companies or tothe Government. It is only when these price measures raise the profits ofpublic entities as a whole--i.e., when they are added to the price of a finalproduct or service--that their full effect will be felt on the budget. This

1/ Increase in average electricity tariffs by 37X, an increase ingasoline prices (by shifting to a different grade and raising itsprice by 5 piaster per liter), increasing and unIfying the variousprices charged for fuel oil to LE 35 per ton for aj.l users anddoubling gas oil, natural gas, and kerosene pricee. Of these, onlythe gasoline price has been fully implemented. Some of theelectricity consumers have yet to pay the higher tariffs and the fueloil, gas oil, kerosene and natural gas prices have not been uniformlyraised to consumers.

- 48 -

is inevitably a slow and difficult process and it is important that theintermediate levels of Government and the public sector cooperate with thenational economic policies decided upon. In the case of subsidies, the realimplementation of the policy requires the removal of non-essential items fromthe subsidized list, rationing access to subsidized goods to low-incomegroups, and raising the prices of subsidized commodities over time. None ofthese measures is administratively easy but are essential for the adjustmentrequired in the budget.

2.7 Energy and other public sector price adjustments, including subsidyreductions, will have to be continued in 1986/87 and beyond in line with theGovernment's goal of eliminating all direct and indirect subsidies by 1992.It will also be necessary to curb the growth of government consumption. Thelargest part of the consumption bill subject to restraint is the wage bill.The Government has progressively restricted the past employment policy thatleft the Government and public sector the employers of last resort. Continuedrestraint by halting the growth of public sector employment and limiting wageincreases to, say, half the increase in the cost of living for the next twoyears should be applied. Restraint on public sector employment must be seenin perspective. Between 1980/81 and 1984/85 public sector employment grew by6.5% per annum and provided nearly half of the total incremental employment inthe economy. In future, as far as possible, the private sector should berelied upon to provide the increment of employment opportunities. In thelong-run, a thorough-going reform of public administration is necessary toboth reduce total employment, raise administrative skills and increase theproductivity of the Government. As these reforms are put in place, budgetarysaving will allow the raising of the salaries of skilled and professionalgovernment servants, which will be required to raise their morale andproductivity.

2.8 Like many other developing countries, the implementation of abroad-based personal income tax in Egypt is constrained by administrativecapacity. At the same time, excessive reliance on customs duties is notdesirable because of the adverse implications for resource allocation. Abetter instrument is a broad-based consumption tax with ad valorem rates. Theconsumption tax is already an important element in Egypt's budget but thepresent system is narrow in scope and contains many specific rates. The taxbase should be broadened by inclusion of more items and specific rates shouldbe shifted to ad valorem rates. As a first step, all commodities which areliable for import duty should be taxed and all rates should be made advalorem. These measures will introduce more flexibility in the budget bybetter linking government revenues with national expenditures. Moreover,taxing commodities without discrimination by source of production will avoidthe distortion of production incentives.

2.9 The above measures will help to increase revenues, reduce subsidies,and contain growth in expenditures. As an illustration, the impact of initialenergy price increases, provided they are passed through, is estimated atLE 600 million. Re-evaluation for customs duty purposes should bringadditional revenues of some LE 700 million. Restraint on public wage billwould bring about a reduction in real spending equal to LE 200-LE 300 millionper annum. Adjustment in other public sector prices again if fully passedthrough, could mobilise LE 500 million or more. It should be possible to cut

- 49 -

the direct subsidy bill by LE 200-LE 300 million per annum. The yield from areformed consumption tax can be quite large. The total impact on the budgetdepends on the vigor of the measures themselves and the speed with which theyare carried through.

2.10 The total impact of the measures outlined above is likely to fallconsiderably short of the overall improvement required in the fiscal situationby 1986/87 due to the difficulty of quickly and completely passing themthrough to the private sector. Indeed it is difficult to imagine thenecessary total adjustment taking place without a significant cut in publicinvestment. The public investment program is currently very large (17X-18% ofGDP). The real level of public investment should be reduced by 1986/87,bringing down its ratio to GDP to around 152 while protecting the essentialpriorities of the program. With better demand management and slower economicgrowth resulting from macroeconomic stabilization measures, less investmentwill be required. A reduction in public investment is desirable because(a) there is substantial spending on low return projects and programs;(b) substantial investments in infrastructures have already been made; and(c) several large projects--especially in steel, cement, and fertilizers--arenear completion. A trimmed down public investment program by 1986/87 willmake room for a modest expansion (at least 2X-3% per annum in real terms) ofpublic investment in the next plan to accommodate high priority energyinvestments. The proposed reduction in public investment program will alsohelp to improve the balance between private and public investment, though thelatter will still account for nearly two-thirds of the total. The specificrecommendations for an orderly reduction and rationalization of publicinvestment are outlined subsequently. It should be stressed, however, that athorough review of the entire public investment program should cover allprojects whether foreign funded or not. Since low priority foreign financedprojects may have to be dropped, early attempts should be made, inconsultation with donors, to restructure foreign financing to meet the needsof the adjustment program.

2.11 Further reduction in the budget deficit as a proportion of GDP willbe necessary beyond 1986/87 because the budget should contribute to the goalof reducing the dependence of the economy on foreign financing. Thesereductions amounting perhaps to another 10% of GDP by 1992 would be much lesspainful in the medium term if commitment to economic energy pricing andelimination of direct and indirect subsidies, which are needed for improvedefficiency remains strong. There will be substantial scope for increasing theelasticity of domestic revenues by broadening the base of the presentconsumption tax, as discussed above.

2.12 In the medium term scenario, outlined above, the public sector, afterinitial adjustment in 1986/87, will continue to grow and remain a very centralforce in the economy. By 1992 the Government will still account for around452 of national expenditures compared to 55% at present. The financial andeconomic performance of public sector companies and economic authorities will,therefore, remain a critical factor not only for controlling the budget butalso for the economy. Improving the efficiency of public sector operations isnecessarily a longer-term challenge which means it is all the more importantto start sooner rather than later.

- 50 -

2.13 Although the growth of money and credit decelerated rapidly between1981/82 and 1984/85, there are signs that it is spurting again. Furthermore,growing dollarization of the economy suggests lack of confidence in monetarypolicies. The growth of money and credit is excessive in relation to thegrowth of real economic activity and the growth has to be brought downfurther, by replacing loan-to-deposit ratios with non-price instruments. Manyof the measures in the economic reform program are price increases and need tobe offset with contractionary macroeconomic policies. Within the lower growthof money and credit, the proportion taken by the Government and certain publicagencies, such as the Supply Authority, ought to be reduced to allow thegrowth envisaged for the productive sectors. The reduction of the bankfinancing of the budget deficit to less than 2% of GDP by the end of 1986/87and zero by 1988/89, will accomplish much of this but the borrowing by someoff-budget public agencies will also have to be limited.

2.14 A key element of the economic reforms needed is adjustment indomestic interest rates. The entire structure of commercial bank interestrates is too low and is ill-designed. The maximum rate charged for any butcommercial dealings is only 13% and many privileged borrowers pay considerablyless. Deposits earn a maximum of 13.25X, with a very narrow spread betweenshort- and long-term deposit rates, giving little incentive to offer longerterm deposits. These rates are not positive in real terms. (Borrowing ratesfor commercial transactions have a minimum of 16% and have no upward ceiling;there is also a credit ceiling restricting the volume of commercial loansbanks can commit.) Furthermore, Egyptians have the option of holdingfinancial assets in foreign currencies, which currently earn 72-8% (in U.S.dollars). Given the low pound deposit rates, their narrow spread and theexpected depreciation of the pound/dollar exchange rate, there is virtually noincentive for Egyptians to hold financial assets in pound term accounts. Oneestimate is that over half of broad money held by the private sector is heldin foreign currency and the economy is becoming increasingly vulnerable tothis proportion growing, should Egyptians lose confidence in the macroeconomicpolicies of the Government. The net foreign currency exposure of publicsector commercial banks is above US$2.5 billion. Continued growth of thisexposure further threatens the confidence in the Egyptian banking system whichcould lead to Egyptians to move these deposits abroad. The Government'scredit policies should encourage greater voluntary conversion of foreigncurrency into domestic assets. It would require pound deposit rates at least5X-6% above the rate of inflation (e.g. 252 in 1985/86) to encourage Egyptiansavers to shift financial assets back into pounds. This adjustment would havethe benefit of decreasing the growth of liquidity in the economy whileincreasing the availability of foreign exchange for domestic productive uses.It would also have the important efficiency effect of pricing capital moreappropriately, while encouraging greater employment generation.

Balance of Payments and Foreign Trade Policy

2.15 Egypt's immediate balance of payments problem can be summarized bythe fact that the financing gap in 1984/85, after deducting grants and othercapital inflows is about 52-6X of GDP. Egypt has no sustainable means tofinance such a large gap. Some of the exceptional practices employed tofinance the balance of payments deficit, notably build up of external paymentsarrears, growth in short-term debt and increase in net exposure in foreign

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currency position of public sector commercial banks are no longer availablewithout jeopardizing the creditworthiness and/or further eroding theconfidence in the currency. In the short-run, therefore, the balance ofpayments deficit must be brought down to levels that can be financed fromavailable means.

2.16 In the medium term, the most important goal of balance of paymentsmanagement should be to reduce the burden of external debt and debt service(in relation to export earnings) from the present unsustainable levels.Uncertainty about the future price of oil and the chances that the real priceof oil will decline further means that growth in overall export earnings islikely to be quite modest notwithstanding prospects of good expansion involume of petroleum exports and assumption of vigorous efforts to expandnon-oil exports and tourism. To reduce the real burden of debt, the stock ofdebt should rise by less than the growth rates of real GDP and exportearnings. This suggests the need to reduce the current account deficit (aftergrants are deducted) to 32-4% of GDP by 1991/92, through increased exportearnings and reduced imports. The speed with which this large adjustment willhave to be made will depend on Egypt's success in mobilizing extraordinaryfinancing (quickly disbursing assistance and debt relief) from theinternational community to ease the adjustment path. This in turn will dependon the international community's perceptions of the seriousness andeffectiveness of the Government's economic reform program.

2.17 In the short run a substantial part of improvement in the balance ofpayments will come from measures aimed at reduction of the fiscal deficitalong with the slower growth of economic activity that is now unavoidable.These will directly and indirectly help dampen the demand for imports and, inthe case of energy, reduce domestic consumption and permit a greater volume ofoil for export. A 25%-30% increase in real energy prices could reducedomestic consumption by 1.4 million tons below projected levels in the firstyear which, if exported, would increase foreign exchange earnings by $139million.

2.18 The steady increase in energy prices consistent with the declaredgoal of reaching international prices by 1992 could provide the basis of agrowing improvement in the balance of payments. If the Government implementsthe energy price increases to attain parity with international prices by early1990's, domestic energy consumption might well be only three-quarters of thelevel of what it would be without adjustment in energy prices. The annualsavings in foreign exchange could well be $1.5 billion per annum by 1994, thusbecoming one of the principal additions to foreign exchange earnings. Therelated consequence of a slowdown in the high growth of energy demand would beenormous savings in power and energy investment requirements. This wouldre-inforce the balance of payments improvement as these investments have ahigh foreign exchange content.

2.19 The energy price adjustments and other fiscal measures will not beadequate, by themselves, for the required improvement in the balance ofpayments. The need to sharply reduce the current account deficit without muchgrowth in major exogenous sources of foreign exchange (oil, workers'remittances, Suez, tourism, grant assistance) requires decisive action toincrease the domestic cost of imports. Making imports more expensive willfurther cut demand for them.

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2.20 Over the past several years, the pound price of foreign exchange hasincreased for a progressively larger proportion of imports, as the financingof public sector imports was gradually moved from the Central Bank pool to thecommercial bank pool and the commercial bank rate was depreciated in a seriesof steps and in a variety of categories of imports. The next step, to betaken immediately, is simply to unify the commercial bank pool with the marketpool of foreign exchange by allowing commercial banks to participate freely inthe already well-established and large open market for foreign exchange. Atthe same time, the Central Bank rate should be moved at least part of the wayas a first step, toward a unified, flexible, market determined rate. As soonas possible, full unification of all foreign exchange transactions should beaccomplished. The advantages of this change are substantial.

2.21 The shifting of foreign exchange demand from the commercial bank pool(where all demand for foreign exchange has not been met at the lower pricecharged and has been rationed) to a unified pool will lead to pressures forthe unified rate to further depreciate. Some further depreciation iswarranted, to curb the speculdtive demand for foreign exchange, to stimulateexports and to offset the higher rate of domestic inflation relative toinflation in the currencies of Egypt's trading partners. There is no need tofear that this adjustment will lead to runaway depreciation or that theexchange rate will spin out of control, provided that supporting measures aretaken. With lower GDP growth, a reduced budget deficit, tighter creditpolicies, lower investment and a higher cost for foreign exchange, anequilibrium will be reached whereby the exchange rate will depreciate at amodest rate that will reflect the differential between Egyptian andinternational inflation.

2.22 The increased cost of foreign exchange will, of course, have to bepassed on to the ultimate consumers. This will mean the adverse impact on thebudget and the finances of the public sector will be eliminated in the end.In the adjustment process, inflation will rise but the deflationary pressuresresulting from other measures (lower budget deficit, absence of governmentborrowing from the banking system, reduction in the growth of credit andhigher interest rates) along with a few years of lower economic growth willcurb the rise in prices.

2.23 The adverse impact on the budget should be eased somewhat byincreasing the prices of those commodities still imported through the CentralBank pool while gradually moving the Central Bank pool rate toward the unifiedrate. The Government's goal of removing consumption subsidies, both explicitand implicit, by 1992 implies exactly this.

2.24 The unification of the exchange rate will at the margin improve theincentives for non-petroleum exports, tourism and workers' remittances. Aneconomic reform program with a floating exchange rate system is likely toincrease confidence in the currency and will encourage a larger proportion ofworkers' earnings to be remitted provided, as discussed above, interest ratesfor pound deposits are made more attractive. To encourage non-petroleumexports it will be necessary to provide exporters of manufactured goodseffective rebates to offset duties on imported inputs.

2.25 Reform of the exchange rate regime will also obviate the need for anyfurther administrative restrictiveness in the import control regime and indeed

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should provide the basis of a more efficient import control policy. TheGovernment has recently substituted the import licensing system by a bannedlist and a system based on tariffs, which are set at different rates for alimited number of different categories of goods. This is the right directionin which to move the import control policy but the details of itsimplementation are quite important for the longer-term economic adjustment toa more efficient structure of domestic production. The introduction of a longbanned list increases the restrictiveness of the system, while the abolitionof the import licensing system is a more liberal policy.

2.26 Egypt now has an import control system that provides highly variablerates of protection for domestic production. The import of some items arebanned while others have very high tariffs. Other goods, often intermediateand capital goods and raw materials, have much lower tariffs imposed. Whenfinal goods are highly protected from imports but their components have lowerduties, the import control system creates an environment where it encouragesdomestic producers to use an extraordinarily high level of domestic resourcesto transform imported components into final goods. This system leads to thedomestic production of some goods at very high (domestic resource) cost. Veryoften it is luxury goods that have the highest tariffs. Consequently, thetariff system encourages domestic producers to manufacture this type ofgoods. This leads to high-cost, inefficient production that has very littledevelopment impact and very little prospects for exporting its output.Usually this is the opposite of what is intended: governments want todiscourage the use of available resources for luxury consumption and ratherwant to channnel them into activities thst have a greater development impact.

2.27 Perhaps the most important longer-term policy to bring about a moreefficient structure of domestic production is a trade policy that creates theright incentives to domestic producers. One key element is a competitiveexchange rate, as discussed above. Another is an open trade policy thatallows Egyptian producers and consumers access to world markets for theirimports and exports. The way to bring this about is to control importsthrough tariffs alone, without quotas or bans on selected goods. The tariffstructure should be as uniform and simple as possible. If Egypt wants to curbthe consumption of luxury or other goods, it should tax the consumption ofthese goods, not their import, which creates high incentives for inefficientdomestic production of them.

2.28 Starting from the position that Egypt is now in, with a highlycomplex import control system, and highly varied incentives to differentproducers, it is necessary to reform the structure gradually, to allowdomestic producers to adjust to world market conditions without causing greatdisruption of current production. The adjustment process entails reducing thetariff differentials among the various import categories and reducing theirnumber. In any economy, producers that have difficulty meeting internationalcompetition seek protection from the Government, which results in the complextariff structure in the first place. Reducing this protection requirespainful adjustment to domestic firms. If done carefully and with aid in theadjustment process, the pain can be made tolerable. In any case, it isvirtually the only way to create an efficient, low-cost domestic structure ofproduction in Egypt which will make the economy grow and develop.

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Reformins the Productive Sectors.

2.29 The boom of the last ten years mainly stimulated the service sectorswhile in comparison the domestic commodity producing sectors languished. Tostimulate more efficient domestic production of tradeable commodities, it isnecessary to improve the incentive system and the allocation of resources thatnow govern domestic production. The adjustment process needed in the long-runis to increase the international competitiveness of domestic output both tosubstitute for imports and to expand exports. Many of the required policymeasures have been discussed above: unification of the exchange rate;improved trade policies; reduction in distorting public sector output prices;improvement in energy efficiency through pricing and demand management; a risein interest rates to make available more resources, both domestic and foreign,for development and improve capital efficiency; and the creation of a stablemacroeconomic environment. Three important aspects of this adjustmentprocess, however, remain for discussion: agricultural reform, public sectorreform and the allocation of investment.

2.30 Policies designed to increase the productive efficiency of the energyand industrial sectors have been discussed above. The agricultural sector,which is still the largest single sector of the economy and by far the largestemployer, will require some policy adjustment as well. (The investmentprograms in all three sectors,,as well as others, will be discussed below.)Agricultural production is largely in private hands and agricultural pricesare less distorted than in the other sectors of the economy. Nevertheless,the nature of the growth that has occurred over the past decade, combined withoutdated government control over production and input supply has left thesector with inefficiencies whose elimination can make substantialcontributions to increasing domestic output and productivity.

2.31 The constraints to growth facing Egyptian agriculture are: a limitedresource base; inadequate or untimely input supplies; confused signals due toinappropriate government policies, both at the farm level and at themacro-economic level; shortages of labor; and inadequate supporting servicesin extension, research and marketing. As discussed below, the prospects arenot good for expanding the land base economically. The need is to make betteruse out of existing resources. including land, labor and water. TheGovernment's production and input control system is outdated and should belargely dismantled. Procurement prices should be transformed into supportprices for most crops. The procurement price of cotton should be raised, toensure it remains adequate to call forth the levels of production needed tosupply the domestic cotton processing industries and to exploit Egypt'sposition in the world markets. The price of wheat is a special problem, asthe internal market prices have been depressed by the large, subsidized importof wheat and flour into the economy. At a minimum, the support price forwheat should be set at the pound equivalent (at the unified exchange rate) ofthe import price; it makes little sense for Egypt to pay foreign farmers morethan domestic farmers for wheat. The input supply and credit systems shouldbe delinked, input subsidies phased out and the private sector should playmore of a role. The supporting services of extension, research and marketingshould be reorganized to provide farmers with timely, tested advice to raiseyields and to efficiently sell their output. These changes, along with theunified and depreciated exchange rate will raise profitability in agriculture,enabling farmers to attract more labor.

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2.32 The share of the public sector in total productive assets has grownquite large in Egypt. The energy, industry, transport and financial sectorsare dominated by public firms. Even in agriculture, public investment isquite large, not only in irrigation but in land reclamation companies,agricultural marketing and even direct production of agriculturalcommodities. The financial effect of most of these public entities, net ofthe Suez Canal and petroleum corporation, is a drag on the budget. Moreimportantly, the economic efficiency of much of the public sector is quitelow, as these entities are struggling with a set of interrelated problemswhich have no easy solutions: poor management, cumbersome organization,distortive pricing, outmoded technology, lack of autonomy, labor problems,poor financial performance and now lack of adequate access to needed imports.The Government has begun to study these problems so as to design an actionprogram of reform. So far work has concentrated on the management issues. Aspart of the economic reform program, the ongoing review of public sectorperformance should be intensified and an action program should be drawn up forimmediate, short-term and medium-term measures. This is a very complexundertaking but a start should be made as soon as possible.

2.33 The most important element of a reform program for public enterprisesis to ensure price flexibility. This is essential not only to correct thedistorted incentives resulting from price controls, but also to allowefficient managers achieve their targets without being financiallyconstrained. There is strong evidence that financial and economicprofitability point in opposit, directions in almost all subsectors inEgyptian industry. A reform of the public enterprises that does not allowprice flexibility will achieve only limited success, as efficient firms willfail to take full advantage of the reform program due to a lack of financialresources. Of course, price flexibility is a necessary but not a sufficientcondition for improvement in public enterprise performance. A second majorelement is to ensure adequate operational autonomy to managers. Thus,enterprise management should have full flexibility in matters of laborhiring/firing, wages and other incentives and also greater say in investmentdecisions. The reward system for enterprise management should be linked toperformance to help institute better accountability. A third element shouldbe financial self-reliance with the assistance from the government budgetelimiuated.

2.34 Since 1974, the private sector has been growing faster than thepublic sector in Egypt and is now dominant in certain areas of the economy.This process should be encouraged to continue and accelerate but in a somewhatdifferent way than in the past. To overcome the highly distorted productiveenvironment, the Government had to create an extraordinary set of incentivesand privileges to encourage private investment, which fostered a dualisticeconomy. Few have been happy with the outcome, as many of the privileges havebeen abused without resulting in the type of private productive structure,with rich linkages to the domestic economy, that was envisaged. Privateinvestment and production have flowed mainly to services and import-intensiveactivities. While continuing to allow private entreprenuers to increase theiractivities, the objective should be to change the productive environmentitself in ways that domestic producers are encouraged to invest and producemore efficiently, thus becoming more competitive in world markets. Again, themeasures needed to create this condition have been discussed above. They

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should be applied equally to the private and public sectors to reduce theduality present in the economy.

2.35 The need to reduce the size of the public investment program wasdiscussed above as a macroeconomic stabilization measure. Even after such areduction, the level of public investment would continue at 14X-16% of GDP, orso, which is quite large, 60b-1002 larger than the anticipated privateinvestment. Maintaining an adequate growth rate of the economy will requirethat the resources available for public investment be allocated in the bestpossible way. This will require a reordering of priorities, completingquickly ongoing projects and concentrating on the productive sectors.

2.36 In broad terms such a reordering would result in a change in thesectoral composition of public investment. The highest priority should begiven to increasing the level of investment in the energy sector to supplymore economically power generation, to foster the development of Egypt's gasreserves and release petroleum for export. A reduction should be made to thesectoral allocation to agriculture brought about by decreasing the scope andsize of the land reclamation program. A further reduction should be made topublic investment allocated to the industry sector, as public funds areconcentrated on completing selected projects in cement, stoel and fertilizerand as the private sector's rate of investment in industry rises. A reductionshould also be made to the allocations to the services sector, particularlypublic utilities, while allocations to the transport sector should bereallocated among the different transport modes. A more detailed discussionof these measures follows below.

2.37 In agriculture, there is a clear need to shift emphasis from effortsfor "horizontal expansion" based on land reclamation plans to "vertical"development in terms of intensifying production on land already undercultivation. In this perspective, investment should be directed principallytowards improvement and extension of drainage, rehabilitation andmodernization of the irrigation system, and adequate maintenance to ensureeffective operation of both irrigation and drainage. Substantial improvementis needed not only in the physical works but also in the operationalefficiency of the water coverage and distribution system at all levels, downto the meska and the farm. This program of irrigation rehabilitation shouldcover all the old lands and also extend to the "old" new lands so as tomaximize benefits from earlier investments in land reclamation. On the basisof available data and past experience, these investments in the drainage andirrigation subsector, which are required in sizable amounts, are likely toyield significant rates of return. The investment program in this subsectorshould include the three barrages on the Nile which require rehabilitation orreplacement as well as numerous structures and pumping &£.dtions which had notreceived the necessary attention in the past. Finally, the most promisingeconomic returns are those expected from the transformation of the presentsystem of acreage allotments for crops, monopoly input distribution andinadequate extension into an effective agricultural service delivery system.The Ministry of Agriculture has begun to revitalize research, extension, seed,credit and agricultural mechanization services but these efforts need to becarried further vigorously and combined with progressive reduction ofproduction controls, and the freeing of input supply to allow an expandingrole for the private sector alongside the cooperatives. Improvement of these

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services is not likely to involve mitch capital investment but would ratherrequire, basically, organizational changes and some related recurrentexpenditures.

2.38 The program of reclamation of new lands, covering over 100,000feddans a year, which absorbs over half of public iavestment in agriculture,is too ambitious and should be drastically cut back. The program's economicreturn is low and can be realized only after long gestation periods. Thepresent program also exceeds the implementation capacity available. Somereclamation projects in the Nile Valley and on deltaic soil, with goodplanning, organization and operation, could yield adequate returns and may beretained. However, new projects outside the valley and delta areproblematical and should not be undertaken. In land reclamation areas wherethe infrastructure already exists, or is in advanced stages, the availableland should be offered to the private sector to develop for productive use.Efforts and funds in the irrigation sector should be directed as indicatedearlier towards making better use of existing water, including groundwater andthe water available for re-use from the drains on existing cultivated areas,including lands reclaimed during the 1960s and 1970s. In view of the aboveassessment of the land reclamation program, planned investments in the threeirrigation canals, El Nasr, El Salem and Ismailiya, should stop when thecurrent phases of their construction are completed. The Jonglei Stage Iproject to enhance the supply of water at Aswan should be completed. Futurestages of the Jonglei project shoald be reassessed carefully and most likelybe dropped. Overall, public investment funds allocated to agriculture, whichhave been rising in the recent past, can be reduced without major medium-termloss of production through selective postponement and elimination ofsignificant parts of the land reclamation program.

2.39 In the industry sector, development of additional capacity should becarefully assessed and planned in parallel with public sector reform, in lightof the slowdown of economic activity anticipated, with schedules and locationsclosely related to regional markets, costs and availability of skilledpersonnel. Supply and demand projections for rebar steel suggest thatprojects under construction should be quickly completed. Caution should beexercised in approving new steel production projects due to the danger ofglutting the market in the late 1980s and early 1990s. Capital outlays infertilizer to restructure and enlarge the ammonia plants remain important; butthe pace of development of the Abu Tatur rock phosphate project should beslowed until the quality of the phosphate rock a-nd its marketability arefurther clarified. The existing Kima and Suez aumonia plants are worn out,energy inefficient and uneconomic. Both should be scrapped and replaced withmodern, gas-fed plants of sufficient capacity to capture economies of scale.Both projects involve the routing of gas pipelines and balancing investment toproduce complete fertilizers. The proportion of public investment devoted tothe public industrial sector has been falling, as private investment inmanufacturing has been rising. This trend is expected to continue and shouldactively be encouraged by the Government through appropriate policies.

2.40 The highest priority public investments lie in the energy sector andallocations to this sector should be increased as a proportion of the total.The demand for electric power has exceeded supply over the last two years andload shedding during peak periods, by as much as 600 MW, has occurred.

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Capacity expansion recently has partly alleviated the situation and madedemand management possible for the time being. Investment decisions have tobe taken quickly if Egypt is not to suffer crippling power shortages in the1990s. The development of natural gas presents Egypt with an economicalopportunity to supply domestic needs for hydrocarbons while releasingadditional quantities of crude petroleum and refined products for export.

2.41 Any investment program in energy needs, however, to take into accountdemand management measures likely to be in place in the future. During1973-83, commercial energy consumption in Egypt expanded by 11.5% per annumwhile GDP expanded by 8.8% per annum. Real energy prices declined by halfover the period. With a three-fold real increase in energy prices over thenext six years, energy elasticity of demand with respect to GDP could fall to0.3-0.4 range compared to 1.3 over 1913-83, meaning the rate of growth ofenergy demand would be only half as fast as the growth of output. If GDPgrowth during 1985-92 is assumed at 3% per annum, energy demand growth will atbest be 1.5% per annum. Other demand management measures, such as anaccelerated program of energy conservation and industrial restructuring,including more efficient energy sources for fertilizer production and closingof the Nag Hammadi aluminum smelter, are also dependent for effectiveness onappropriate price signals.

2.42 Inaddition to effective demand management practices, the maindevelopment issue in the power sector is selecting the fuel source for futureplants. Coal-fired and gas-fired power stations would be the most economicoptions to supply nearly all of the future growth in demand. The capitalcosts of nuclear plants are still such that coal or gas fired stations(depending on the economic value of gas) are cheaper for Egypt to develop.Nuclear plants remain dependent on heavy subsidization of capital costs to becompetitive, including the one plant currently under discussion. Given thepresent uncertainty over the total level of natural gas reserves and thelikely pace of its development, the Government should proceed rapidly to planand carry out the 1200 MW coal-fired station at Kuraimat or Sinai. Thisfacility should be equipped to burn alternatively gas, oil or coal. A largeccal-fired power station would require the development of a suitablecoal-handling port, whose preparation should be initiated immediately. EEAshould reconsider its plans to construct several large new conventional steamturbine units based on oil or gas in view of the economic superiority ofcombined-cycle plants. The Qattara Hydro solar power project should bepostponed indefinitely, as the extensive studies carried out on the variousalternatives of this project indicated its rate of return is too low,particularly given its inherent risks.

2.43 From the standpoint of developing a longer-term power generationinvestment strategy, it is important for Egypt to know more than it now doeshow much natural gas will become available and on what schedule. If gas ismore plentiful than proven so far, it would make sense for EEA to develop apower generation investment program based on natural gas as the primary fuel,as it would be *nore economic than coal and would not have to be imported. Ifthere is no more gas than is required to substitute for all fuel oil uses(where substitution is feasible), the opportunity cost of gas remains at itsfuel oil equivalent and coal is a cheaper cption for power development. Thisunderlines the urgency of accelerating Egypt's gas exploration aDd development

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plans. Investing in gas exploration, development and utilization remains thesingle highest return activity the Government can undertake. Expandingproduction from existing fields (Abu Gharadig, Abu Qir, Abu Maadi and the Gulfof Suez) using existing pipeline infrastructure, is perhaps the first prioritypublic investment. Then developing new fields close to existing pipelines(Ammal, Naf, Timsah) should be accelerated. The development of pipelinesshould proceed on several fronts: making individual links to serve largecustomers (e.g., Shoubrah El Kheima from Abu Maadi and El Dikheila from AbuQir); expanding the regional transfer of gas (e.g., from Suez to Cairo); andplanning and building an integrated grid to link Egypt's fourproducing/consuming regions to make fuller use of the available natural gas.

2.44 Fewer resources should be allocated to the services sector. Theproportion of public investment to the transport sector has been declining, inlarge measures because of the lower requirements for the Damietta Port, SuezCanal and the railways. However, appropriations for air navigation have beenrising very fast and may need to be adjusted downwards. Inland waterwaysshould receive more attention as present allocations are insufficient to helpit play a meaningful role in the key transport corridors (Alexandria-Cairo andDamietta-Cairo). Allocations to roads should be maintained and in some casesincreased, particularly for rehabilitation to help improve users' efficiency.The modal mix of investments needs to be reoriented toward inland waterwaysand roads and away from railways and, to some extent, ports. With the ongoingworks, the ports subsector should be adequate to meet the expected demand.Improvements in operations, management, maintenance and pricing, should alsohelp increase the yields of investments, particularly in the case of therailways.

2.45 The present expansion program in telecommunications should graduallybe brought down to levels which are consistent with improvements inorganization, management, finances, planning and implementation to adequatelyhandle the task of expansion and maintenance of good quality service.Emphasis should be placed on replacement of worn-out equipment and onstandardization of equipment, particularly telephone switchboards. Fundsallocated to urban development should be decreased by reducing investment infree-standing new communities and remote areas, which have very long gestationperiods and high costs. Emphasis should be placed on improving the managementof existing cities, which in any case will have to absorb the bulk of futureincreases in population. There has been a very large increase in fundsallocated to water and sewerage, which is no doubt warranted by the low levelof existing services. However, institutional arrangements are weak andrecovery of the costs of providing services inadequate. At the same time,implementation capacity is inadequate, thus suggesting some cut-back can bemade, mainly in Cairo and Alexandria, without jeopardizing the pace of actualachievement. In the education sector, the strategy of the Government toimprove the quality of basic education and to extend it to the ninth grade, toemphasize technical secondary education and to diversify higher education areall appropriate. However, still too many resources are allocated to higherand professional education (over half) and too few to basic education andvocational training. This situation should be corrected without delay toprevent further resource misallocation.

2.46 Given the less favorable external environment facing Egypt and theneed for readjustment, there is little alternative but to scale down and

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reorient the public investment program. Even with additional fiscal measures,in the short-run, public investment will have to be reduced to help bringabout improved macro-economic performance. In doing so, however, realignmentof investment priorities is crucial in order not to penalize activities whichcan yield results in a short period, such as energy and the productivesectors. The alternative to this process, in the face of a growing resourcescarcity, is to continue to spread the inadequate resources across the wholeinvestment program, thereby delaying the completion of all projects. Thisneedlessly ties up too much of scarce resources in unfinished projects,delaying benefits and raising the capital-output ratio. Furthermore, not allprojects are of equal importance to Egypt's growth and development; only thosethat will raise the productivity of public investment and create the resourcesfor future investment and growth should be kept in the adjusted publicinvestment program. Through well designed reductions in capital outlays,combined with sectoral policy reform and institutional development, fundscould be released to help narrow the overall fiscal gap.

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CHAPTER III

THE ECONOMIC OUTLOOK

A. Introduction

3.1 Chapter I of this report concluded that under existing policies, theeconomic outlook facing Egypt was difficult. Even with drastic cuts in thevolume of imports lasting through the end of the decade, Egypt would be hardpressed to meet its external debt service obligations. Economic activitywould fall resulting in severe declines in real levels of living for aprolonged period. Given the resource scarcities facing Egypt, some decline inreal per capita income is inescapable. But a program of vigorous andcomprehensive policy reform, such as that outlined in Chapter II, can reversethe deteriorating trends by restoring growth to the economy in themedium-term. This chapter presents the economic outlook in quantative termsunder the policies described in the previous chapter.

3.2 The economic outlook under improved policies would be much morefavorable than under existing policies. Although adjustment under theeconomic reform program outlined would have its costs during a transitionalperiod of austerity, the costs would be significantly less and of a shorterduration than would be the case without policy change. Under existingpolicies, GDP would decline by 32 in 1986/87 and continue to decline in thefuture, meaning severe declines in per capita consumption for years. Withpolicy adjustment, the growth of GDP declines for a period but does not turnnegative; by 1988/89, the growth of GDP rises to 3% per annum and increasesthereafter to reach 6S per annum by 1993/94. Due to the rise in domesticsavings in the policy reform case, real private consumption per capita declinethrough 1991/92 by a total of 122 from its current level but rises from thenon, as the adjustment would be largely completed. The eventual decline inconsumption would be greater under existing policies, without the hope of asubsequent rise. With policy reform, the foundation is laid for more rapid,self-sustaining growth in the future.

3.3 The main reasons for the more favorable projections with policyreform is that Egypt can no longer escape from making some adjustment to theresource scarcity facing the economy. Under existing policies the Governmentmust cut imports drastically to reduce the gap in the balance of payments.This along with cuts in the public investment program would reduce the growthof GDP below zero. The policy reforms themselves would generate someadditional foreign exchange earnings-mainly additional oil exports andworkers' remittances. Furthermore, with the improved economic outlook,additional external finance can be expected to close part of the foreignexchange financing gap, meaning imports would not have to be cut as far or aslong. The increased public saving that will accompany the policy reform willprovide the resources to raise public investment above the level it would bepossible to finance without policy reform. Finally the improved efficiency inresource use brought about by the reformed policies would generate more growthand higher real incomes from the available imports and investment.

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B. Medium-Term Scenario

3.4 This section presents results of a projection through 1993/94 ofmajor economic variables within a macroeconomic framework. This framework wasconstructed from the salient features of the Egyptian economy, the outlook forexternal developments outside of Egypt's control and the policies discussed inthe previous chapter. Table 3.1 presents the assumptions adopted for theprojections for three of the key price changes: the exchange rate, energyprices and subsidized food prices. These price assumptions are illustrativeof the adjustments needed. Other assumptions are discussed along with thepresentation of the results and in the final section which provides additionalbackground on selected issues arising from the policy reforms.

Table 3.1: POLICY REFORM PRICE ASSUMPTIONS

AverageOfficial Market Domestic DomesticExchange Exchange Petroleum SellingRate Rate Product Price ofLE/$ LE/$ a/ Price b/ Wheat

Average Rate of Change (S)(1984/85-1989/90) 33.3 15.9 38.1 37.4

1984/85-1993194 20.9 11.6 33.3 24.8

a/ De-facto official exchange rate as applicable for public sector exports andcurrent imports.

b/ Excludes natural gas.

Import Capacity

3.5 Table 3.2 summarizes Egypt's projected current account receiptsthrough 1993/94. For the period 1984/85 to 1993/94 their total rises only7.9% in current dollars per annum, compared with 16.9% per annum between 1974and 1984/85. The behavior of import capacity, defined as current accountreceipts divided by the import price index, as shown in the last line ofTable 3.2, is quite revealing. Following an average growth rate exceeding 14%in the 1974-1984/85 period, import capacity growth decelerates sharply,falling to only 1.3% in the period 1984/85 to 1993/94. A broader measure ofimport capacity, which includes constant dollar values of both current andautonomous capital receipts in the balance of payments (Table 3.3), also showsa trend of marked deceleration. Despite rescheduling and additional financialassistance, the decline in Egypt's import capacity will be particularly sharpin 1986/87 and 1987/88.

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Tabl.e 32: OUTLOOK FOR THE BALANCE OF PAYMENTSCURRENT ACCOUNT

(In Millions of US$. Current Prices)

Actual Proiected1984/85 1985/86 198fi187 1987/8a 1988/89 1989/90 1991/92 1993/94

1. Merchandise ExRorts.f.o.b. km6249 5748 4221 5M 6543 Z71 MI4 12285

Petroleum-Egypt 2891 2351 1177 1765 2198 2472 3421 4646Petroleum-Foreign

Companies 2064 1997 1546 2010 2584 3027 3941 4862Other Exports 1294 1400 1498 1623 1761 1914 2279 2777

2. Merchandise Imports.c.i.f. -1130S -10411 -10000 -11000 -llSOQ -12SOn -15000 -19000

3. Net Non-factor Services I335 1757 J219 2351 = =2 2232 4871Receipts 2658 2994 3187 3450 3800 4233 5306 6653of which Tourism (409) (348) (447) (500) (554) 640 839 1100

Suez Canal (897) (994) (1050) (1086) (1191) (1307) (1634) (2044)Payments -1323 -1237 -997 -1099 -1212 -1303 -1514 -1782

Resource Balance -372 -290fi =aaj -3252 -236i9 -2156 -1566 :1a44

Net Factor Services 113 =683 492 -aA -920 J-156 -1215 -1628Receipts 4296 3739 3838 4037 4339 4759 5694 6432of which workers'remittances (3496) (2950) (3000) (3100) (3300) (3600) (4300) (4700)

Paymfents -4183 -4422 -3789 -4526 -5259 -5815 -6909 -8061

Net Private Transfers 22 30 35 38 41 44 SO 55

Current Account Balance -3Sfli -3559 -3505 -3703 _-324 -3168 -2731 -3418Current Account Recei0ts 13225 12270 11281 12923 14723 16449 20691 25426Current Account PaYments -16811 -15829 -14786 -16626 -17971 -19617 -23422 -28844Current Account Balanceas a % of GDP -11.8 -11.0 -11.7 -13.7 -10.8 -9.5 -6.5 -6.6

Growth in Importcapacity (%) a/ 2.4 -11.6 -12.4 9.1 8.5 6.4 6.8 5.6

a/ Current account receipts deflated by import price index.

Source: World Bank

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Table 3.3: CAPITAL ACCOUNT(In Millions of USs. Current Prices)

Actu1A Pro leectad1984/85 1985/86 1986/87 1987/88 1988I 89 1989/90 1991/92 1993194

Current Account Balance -3586 -3S59 -3505 -3703 -3248 -3168 -2731 -3418

Grants 1050 1370 800 860 926 997 1135 1263Project Related 850 620 sso 610 676 747 885 1013Non-Project Related 200 750 250 250 2S0 2S0 250 250

Direct Foreign Investment 964 1022 1184 1281 1387 1503 1766 2015

Net MLT Loans 714 293 1361 1438 1580 1032 1374 1948Of which:BOP Financing (0) (0) (750) (750) (750) (0) (0) (0)

Balance on AutonomousTransactions -858 -874 -160 -124 646 364 1544 1808

Change in Reserves(minus indicates increase) 0 174 -500 -500 -646 -364 -1012 -1151

Change in Arrears 1300 700 -2000 0 0 0 0 0

Gap Amortization 0 0 0 0 0 0 -532 -657

Gross Gap Financing 0 0 2660 624 0 0 0 0

Debt Rescheduling 0 0 I 2660 624 0 0 0 0

Debt-Service Ratio (%) A/ 34.7 41.7 35.4 32.9 36.3 34.9 33.2 28.1

Total Import CapacityGrowth kb (X) 3.9 -10.7 -12.1 -1.1 -0.3 2.2 6.5 5.6

I/ Excludes rescheduled payments in FY87 and FY88.II Current account receipts plus direct foreign investment and net lLT loans and grants.

Source: World Bank

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Graph 16: Import Capacit.r,sVarious Scenarioscawn t hu in townS*

1983/84 1985/86 1987/88 1989/90Fisca-I Years

CS Existing Policy 40 Policy Reform

a/ Current account receipts deflated by import price index.

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3.6 One important reason for the decline in Egypt's importing capacity isthe fall in oil prices (see Table 3.8). This affects not only Egypt's oilearnings but also the level of worker remittances. However, throughreasonable policies on exchange rates, interest rates and other fiscalincentives, Egypt could reverse the trend in declining workers' remittances.The projections of workers' remittances are based on these policy improvements(see Para 3.29-3.31 for assumptions on other exports).

3.7 The projections of current account receipts, scheduled debt servicepayments and debt relief define the upper limit to Egypt's imports in themedium-term (see Tables 3.2 and 3.3). The magnitude of the adjustmentrequired is dependent upon the amount of additional international assistance.In this outlook, the assumptions on such assistance are: debt reschedulingamounts to US$2.7 billion in 1986/87 and US$0.6 billion in 1987/88. Debtrelief repayments, therefore, begin in 1990/91. Special balance of paymentssupport of US$0.75 billion is also assumed in each of the years 1986/87,1987/88 and 1988/89. Half of this cash assistance is diverted from bilateralaid programs that otherwise would transfer the amounts more slowly throughproject financing. The other half is entirely additiGnal in response toEgypt's economic reform program. Even with debt re-scheduling, merchandiseimports, which declined by US$0.9 billion to US$10.4 billion in 1985/86, wouldremain roughly at that level in 1986/87 and then rise gradually to US$15billion by 1991/92 at an average growth rate of 8.5% in nominal US dollars (orabout 3.52 in constant dollars).

3.8 Low imports could have serious repercussions for GDP growth, throughdeclines in capacity utilization. This can be eased by policy changes thatinduce efficient import substitution. One way in which this would happen isthrough changes in the composition of imports. Higher food prices toconsumers and producers would reduce consumption and increase domestic foodproduction, thereby reducing the growth in food imports (see Table 3.4). Thecuts in public investment lead to a fall in capital goods imports in 1985/86.Low public investment would cause a slow increase in subsequent years. Thegrowth in consumer durables would also be controlled by the depreciation ofthe exchange rate, although a substantial volume would still come in the formof own-exchange remittances. As a result of these cuts in other categories,imports of intermediate goods would not be adversely affected. With theimproved economic climate and a more efficient import structure, capacityutilization would improve.

Saving, Investment and Growth

3.9 The projected developments in the national accounts are summarized inTables 3.5 and 3.6. GDP at market prices is projected to grow at an annualrate of about 2.4X per annum between 1984/85 and 1989/90, rising to 4.4%between 1989/90 and 1993/94. In the last year, i.e. 1993/94, growth reaches62 per annum, so that the reform program restores the economy to a healthy andsustainable growth path. Moreover, the structure of the economy would improvenoticeably because higher growth comes from non-oil production sectors,particularly industry and agriculture. Although investment growth is slowerthan it has been in the past-public investment declines between 1984/85 and1989/90-the main impetus to growth comes from a rationalization of the publicinvestment structure, a higher share of private investment, and increased

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Table 3.4: COMPOSITION OF IMPORTS UNDER ADJUSTMENT PROGRAM, EGYPT(US$ million)

Category 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90

Petroleum 424 419 264 318 390 431(3.8) (4.0) (2.6) (2.9) (3.4) (3.5)

Intermediate Goods 3928 4164 4336 5019 5210 5706(34.8) (40.0) (43.4) (45.6) (45.3) (45.7)

Capital Goods 3154 2811 2700 2900 3000 3300(27.9) (27.0) (27.0) (26.4) (26.1) (26.4)

Consumer Durables 757 742 600 600 650 700(6.7) (7.1) (6.0) (5.5) (5.7) (5.6)

Non-Durables a/ 1956 2275 2100 2163 2250 2363(17.3) (21.9) (21.0) (19.7) (19.6) (18.9)

Total 11305 10411 10000 11000 11500 12500

a/ Includes wheat products.Note: Figures in brackets are percentages of total.

Source: World Bank

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Table 3.5: NATIONAL ACCOUNTS. 1984/85-l993j94(In millions of LE/Current Prices)

Nominal AverageGrowth Rate f()

Estimated Projected - 1984/8s- 1984/85-1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1993/94 1989/90 1993/94

GOP at Factor Cost 30945 35227 41363 56048 70893 86068 175176 22.7 21.2

Net Indirect Taxes 1682 2028 4857 6844 9303 11460 19701 46.8 31.4

GOP at Market Prices 32627 37255 46219 62892 80196 97528 194877 24.5 22.0

Resource Gap 4006 3352 5521 7580 6292 6305 6936 9.S 6.3

Iqiorts (G & nfs.) 13593 13435 16918 28204 33719 40360 78133 24.3 21.4Exports (G & nfs.) 9588 10083 11397 20624 27437 34055 71197 28.9 25.0

Total Expenditure 36633 40607 51740 70479 86488 103833 201813 23.2 20.9

Consumption 27686 31336 40935 55575 68293 80742 15S921 23.9 21.1

Public 7628 8599 10668 14517 18511 22511 44981 24.2 21.8Private 20058 22737 30287 41059 49782 58231 110940 23.8 20.9

Total Investment 8947 9271 10785 14904 18195 23095 45892 20.9 19.9

Public a/ 6556 6400 7107 10193 12160 15366 305S7 18.6 18.7Private 2391 2871 3678 4711 603S 7730 1S33S 26.S 22.9

Domestic Savings 4941 S919 5264 7317 11903 16786 389S6 27.7 2S.8

Net Factor Income 122 -788 7S -1141 -2439 -3086 -6122

Net Current Transfers 24 35 54 89 109 129 207 40.0 27.1

National Savings 5087 5166 5393 6265 9S73 13829 33041 22.1 23.1

A/ Includes foreign oil company investment.

Source: World Bank

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Table 3.6: RESOURCE BALANCE, 1984/85 - 1993/94(In millions of LE/Constant 1984/85 Prices)

Average Annual Growth Rate"Base Case"

Estimated Projected 1984/85 1989/90 1984/851984/85 1989/90 1993/94 1989/90 1993/94 1993/94

GDP at Market Prices 32627 36717 43656 2.4 4.4 3.3

Terms of Trade Effect 0 -2975 -2888 - - -

Gross Domestic Income 32627 33742 40768 0.7 4.8 2.5

Resource Gap 4005 1820 1283 - - -

Imports (g & nfs) 13593 11644 14424 -3.1 5.5 0.7Capacity to Import

(g & nfs) a/ 9588 9824 13141 0.5 7.5 3.6Exports (g & nfs) 9588 12799 16029 6.0 5.8 5.9

Total Expenditure 36633 35563 42050 -0.6 4.3 1.5

Consumption 27686 27448 31660 -0.2 3.6 1.5Public 7628 7710 9372 0.2 5.0 2.3Private 20058 19738 22288 -0.3 3.1 1.2

Investment 8947 8115 10390 -1.9 6.4 1.7Public 6556 5399 6918 -3.8 6.4 0.6Private 2391 2716 3472 2.6 6.3 4.2

Domestic Savings 4941 6294 9108 5.0 9.7 7.0

Memo Items:GDP Deflator 100.0 265.6 446.4Import Price Index ($) 100.0 127.6 155.1Export Price Index ($) 100.0 98.0 127.2Total Expenditure Deflator 100.0 292.0 479.9Investment Deflator 100.0 284.6 441.7Consumption Deflator 100.0 295.0 492.5

Weighted Average Exchange 100.0 271.6 349.3Rate Index (LE/$)

Market Exchange Rate 100.0 208.8 268.4(Index (LE/$)

Current Account Deficit -11.8 -9.5 -6.6(% of GDP)

Fiscal Deficit (% of GDP) -23.6 -8.6 -5.8Domestic Savings Rate (%) 15.1 17.1 20.9Debt Service Ratio (%) 34.7 34.9 28.1

Source: Bank staff estimates based on the projections.a/ Capacity to import is defined here as export receipts from goods and non-factor

serv;es defl:ittt*d by the import price intlex (the standard Bank definitiotl).

4) -4-

^ Esn-o a.

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Graph 18 Investment-Saving Balance,FY85-FY94

44

10

!

o-

a 0.nJ.wia . .. r"'

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capacity utilization in the public enterprises. The incremental capitaloutput ratio rises initially because of low growth, but falls dramatically inthe last five years as the economy gains momentum and, as efficiency andcapaci,ty utilization improve.

3.10 Despite the weakening of the external environment, foreign savingwould continue to play a major role. The foreign saving rate (current accountdeficit as a proportion of GDP) is projected to decline from 12% in 1984/85 toabout 10.02 in 1989/90, and 6.62 in 1993/94. The assumed contribution offoreign saving is consistent with maintaining a reasonable debt-serviceratio. The debt-service ratio would improve significantly, declining from 422in 1985/86 to 28% in 1993/94. The projected deficit in the balance ofpayments in 1986/87 adds to the debt service burden in 1987/88; however, debtrelief assumed in 1986/87 and 1987/88 will keep the actual debt service inthose and subsequent years at manageable levels. It is doubtful whetheradditional non-concessional sources of financing (suppliers credits, exportcover and commercial lending) would become available during 1986/87 and1987/88 to see Egypt through these tight years given the trend of thesesources of financing to reduce their exposure in Egypt. Debt scheduling seemsrequired. However, once the economy adjusts to these difficulties, mainlythrough import controls and slowdown in growth, a more manageable debt-serviceratio would emerge despite added debt relief repayments.

3.11 Domestic savings rise from 15.1% of GDP in 1984/85 to 20.9% of GDP in1993/94. Its rise is brought about by policy actions to temper the growth inconsumption, such as the depreciation of the exchange rate, the reduction insubsidies, the restraint on the Government's wage bill, the reduction in thedeficits of the public enterprises, and the increase in transferred profits ofthe petroleum authority through increases in energy prices. Between 1984/85and 1989/90 there is no growth in total consumption, so that consumption percapita will decline by the rate of population growth, i.e. about 2.6% perannum. In order to reduce economic distress on the poor, the Government willneed to target more effectively its subsidy programs to the very poor.Positive growth in per capita consumption is, however, restored by 1989/90 andrises by 1% per annum between then and 1993/94.

3.12 The rise in domestic savings is necessary, to reduce foreign savingsand thereby restrain the growth in Egypt's debt, while at the same timemaintaining sufficient investment to restore growth in the economy in themedium-term. Although Egypt's total debt outstanding continues to rise innominal dollar terms, it declines as a share of GDP. Civilian medium andlong-term debt as a share of GDP declines from 63.1% in 1984/85 to 58.9% in1993/94; and foreign exchange reserve levels rise from 2 weeks of imports toabout 3 months of imports during the same period.

Fiscal Balance and Inflation

3.13 The deceleration of public investment and slowdown in currentexpenditure would help the fiscal balance. The overall fiscal deficit woulddecline from 23.5% of GDP in 1984/85 to about 10% of GDP in 1988/89 and to5.8% of GDP in 1993/94 (see Table 3.7). This fall could be more rapid shouldthe Government take more vigorous measure. The fall in the fical deficit isa result primarily of both increases in revenues from petroleum due to higher

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Table 3.7: FISCAL BALANCE WITH POLICY REFORM(As a share in GDP)

1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1991/92 1993/94

Total public revenue 34.7 31.7 32.1 34.6 35.4 35.9 37.7 37.9

-tax revenues 19.2 19.0 20.6 20.5 21.4 21.6 20.8 21.0-non-tax revenues 3.3 3.2 a/ 2.7 2.4 2.3 2.2 2.0 1.9-public economic-sector surplus 12.1 9.5 8.7 11.7 11.7 12.0 14.9 15.0

Total public expenditure 58.2 54.0 46.2 46.1 45.2 44.5 44.7 43.8

-current expenditure 38.1 36.8 30.8 29.9 30.0 28.7 29.0 28.1-investment expenditure 20.1 17.2 15.4 16.2 15.2 15.8 15.7 15.7

Overall fiscal deficit 23.5 22.3 14.1 11.6 9.8 8.6 7.0 5.8Bank financing 9.7 9.3 b/ 1.6 1.2 0.0 0.0 0.0 0.0

Other domestic financing 7.5 8.1 8.1 6.8 6.7 5.8 4.6 3.8External financing 6.3 4.9 4.4 3.6 3.1 2.8 2.4 2.0

a/ Includes LE 582 million of revenue unallocated to appropriate categories.b/ Includes LE 888 million in bank borrowing by the Supply Authority to finance

additional expenditure.

Source: World Bank

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domestic energy prices, and cuts in public investment and currentexpenditure. Current expenditures are projected to decline faster thaninvestments in the medium-term, although in the initial years the cuts ininvestment are more rapid.

3.14 Despite rapid devaluation, increases in energy prices, and reductionin subsidies, inflation in the medium-term is lower than in the past. In thefirst two years 1986-88, inflation is high in the 25b-30% range. Butdeclining fiscal deficits, reduction in the growth of credit, combined withhigher growth, reduces inflation in 1992/93 and 1993/94 to about 12 percentper annum compared to about 18 percent in the last five years.

C. Selected Issues in the Economic Reform Program

Energy Pricing

3.15 The petroleum price increases envisaged under the economic reformprogram have a major impact on the growth of consumption. The increase inprices and the slower growth in the economy, combined with other energyconservation measures, lead to a fall in petroleum consumption from 1986/87 to1991/92 (see Table 3.8); it rises after that because of higher overalleconomic growth. The projections on consumption, along with the likely trendsin oil and natural gas production, determine the volume of Egypt's oilexports. Egypt's foreign exchange earnings are in turn dependent on the levelof international oil prices. There is considerable uncertainty about futureprice trends, given recent upheavals in the oil market. Current expectationsare that oil prices will continue to decline in 1986, and then rise veryslowly over the next few years. Price projections, as well as other keyassumptions and results relating to the petroleum and gas sector, arepresented in Table 3.8.

3.16 Changes in the level of domestic energy prices have a major impact onthe budget as well as on the balance of payments. Higher energy pricesincrease the level of profits transferred from the petroleum authority.Moreover, growth in domestic consumption of petroleum products and natural gasis reduced thereby increasing Egypt's exportable surplus. The benefits of anenergy pricing program in which domestic energy prices reach projected worldprice levels by 1991/92, can be seen in Table 3.9. By 1993/94, adoption ofthese package would raise an additional US$1.5 billion in export earnings, andLE 12.5 billion in increased budget revenues, which amount to 17b of totalrevenues projected for that year. In addition to its impact on fiscalrevenues and export earnings, moving energy prices to world price levels wouldalso change relative prices between various petroleum products to economiclevels and thereby improve efficiency.

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Table 3.8: MEDIUM-TERM OUTLOOK FOR THE OIL & GAS SECTORWITH ECONOMIC REFORM PROGRAM

Estimated Projected1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1991/92 1993/94

(million tons)

Crude PetroleumOutput 43.7 42.2 46.0 50.0 50.0 50.0 50.0 50.0

Of which:Egypt's share 33.1 29.7 29.5 32.0 31.1 30.0 29.0 26.5Natural Gas Output 3.2 3.9 4.2 5.0 6.0 7.2 10.4 15.0

Volume of Exports:Crude a/ 11.6 10.9 8.4 9.9 8.0 5.7 2.3 0.0:Refined Products 3.1 3.8 4.3 6.1 8.4 11.0 16.6 23.3

Consumption ofpetroleum andnatural gas 21.1 21.2 21.9 21.9 21.6 21.2 21.1 21.6

($ per barrel)Crude Export Price 27.0 22.2 13.0 15.5 19.0 21.0 26.0 28.9

a/ Excludes foreign oil companies exports, but includes Egypt's share of costrecovery.

Source: World Bank

Table 3.9: IMPACT OF ENERGY PRICE REFORM

1987/88 1991/92 1993/94

Reduced Annual Consumption ofPetroleum and Natural Gas(m. tons) 1.4 4.5 6.8

Increased Export Earnings(US$ million) 139.0 689.7 1459.0(as a 2 of export earnings) (2.6) (7.2) (11.9)

Increased TransferredProfits from PetroleumAuthority (LE million) 850.0 7996.0 12518.0(as a S of Government Revenue) (3.9) (15.1) (16.9)

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3.17 A major uncertainty to Egypt's medium-term growth prospects is thefuture trend in international oil prices. Egypt's crude export price isprojected to rise from current levels to US$21.0/bbl by 1989/90 andUS$29.0/bbl by 1993/94. If in oil prices increase more slowly, Egypt's growthprospects will decline even with an economic adjustment program. A US$5/bblreduction in export prices from 1989/90 to 1993/94, from the projected levelswould reduce GDP growth by about 1.52 per annum on average in that periodsince import growth would have to be reduced to maintain debt service ratiosat about 29% per annum.

Reform of the Public Sector

3.18 A critical element of the economic reform program involves a majorreform of the public enterprises./' This reform would entail (a) greaterprice flexibility, (b) greater autonomy in employment decisions, and(c) greater autonomy in overall decision-making. These steps are central tothe success of the overall program, because as input prices are raised throughincreases in the prices of energy, foreign exchange and credit to theseenterprises, their operating losses (profits) would increase (decrease).Unless these enterprises have flexibility in raising prices, labor policy andoverall management, they would become a larger drain on the budget. Moreover,unless cost increases are ultimately passed on to the final consumers, theeconomic adjustment that Egypt needs would not materialize. The existingimplicit subsidies due to overvalued exchange rates and low energy prices,would simply translate into explicit budgetary subsidies.

3.19 The im?act of this public sector reform is modelled on the basis of aprevious study, which was designed to analyze the costs of pricedistortions in the Egyptian economy. The results of this exercise indicatethat it is important to distinguish between macroeconomic trends during theinitial adjustment period and the growth path once the adjustment has beencompleted.

3.20 Initially the increases in prices accelerate cost-push pressures inthe economy. In addition, import cuts and the need to bid for foreignexchange and domestic intermediate inputs reduce capacity utilization andgrowth. This, in turn, reduces income generation throughout the economy,including income accruing to the public sector and the Government. Moreover,if employment adjustments are allowed, income growth is further reduced.These effects are offset by additional revenues from the price increases,which can be used for additional investment and reduced budgetary deficits.But on balance, at first growth is lower and prices higher than without policychanges.

1/ The Bank is currently preparing a detailed study of the financial andeconomic reforms of Egypt's public enterprises.

2/ This study titled "Macroeconomic Effects of Efficiency Pricing in thePublic Sector in Egypt," World Bank Staff Working Paper, Number 726. Ituses a general equilibrium model of the economy called MISR2, designed toanalyze the short to medium-term macroeconomic consequences of policiesof the type proposed here.

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3.21 As the adjustment process proceeds, these trends are reversed.Higher public sector surpluses lead to lower budgetary deficits and lessinflation. Higher investment growth, improved efficiency and increasedcapacity utilization, once again due to eased foreign exchange constraints,raise income growth, which leads to higher and sustained economy-wideemployment growth (see Table 3.10).

Table 3.10: EFFECT OF PUBLIC SECTOR REFORM ON KEY IINDICATORS

Difference in Growth Rate by 1991/92with reform versus no reform

(2)

Real GDP 1.9Real Investment 2.4Employment 0.6Consumer Prices -3.0Exchange Rate Depreciation -2.0

Source: IBRD staff estimates.

Agricultural Pricing and Production Policies

3.22 The agricultural sector must play an important role in Egypt'sadjustment effort. Agriculture's relative flexibility, higher employmentintensity and lower foreign exchange needs make its role more critical in aperiod of austerity and balance of payments difficulties. In the last decade,the agricultural sector has been adversely affected both by Governmentpolicies and inadvertently by external economic forces as was discussed inChapter 1.

3.23 With continued labor force growth, the slowdown in growth in othersectots of the economy and reduced work opportunities in neighboring oil richcount:ies, the trend towards labor shortages and rising wage costs should slowdown and reverse itself. However, without appropriate policy initiativesagricultural growth will remain low. The agricultural trade deficit,estimated to be US$2.6 billion in 1983/84, would increase further despite aslowdown in demand due to lower growth.

3.24 Although the agricultural sector faces fewer distortions than othersectors of the economy, Government pricing policies for Egypt's efficientimport substitutes-especially wheat-remain as issues. Moreover, theGovernment's restrictions on import of livestock products result in fodderprices (which are high) relative to other crops. At the same time theGovernment's area and input controls continue to constrain farmers'flexibility to respond to economic incentives. Despite the severe landconstraints, there is considerable potential for increases in agriculturalproductivity which can restore Egypt's agricultural growth to a long-runaverage of 3 percent per annum if these pricing issues are addressed. Theseneed to be complemented with efforts to liberalize the input Aistributionsystem, strengthen the research and extension system, upgrade the waterdistribution and drainage systems, and improve and streamline the

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institutional arrangements and coordination among the Ministries ofAgriculture, Irrigation and Land Reclamation.

3.25 These changes pertain specifically to the agricultural sector. Atthe same time, overall macroeconomic and trade policies also affectagriculture adversely. In particular, heavy protection of industry relativeto agriculture, through import tariffs and quotas, severely undermineagricultural incentives (see Table 3.11) in Egypt even in comparison to otherdeveloping countries which follow similar development strategies. Suchpolicies draw resources out of the agricultural sector. Moreover, by shiftingdemand to non-traded goods, such policies also lower prices of tradedagricultural goods relative to non-traded goods and thereby undermineagricultural exports. Efforts to improve agricultural incentives throughsectoral policies would, therefore, need to be combined with a majorrationalization of Egypt's trade regime. The cost of the existing traderegime have been unusually high in Egypt. Not only has the regimediscriminated against the agricultural sector but also it has not beenparticularly successful in establishing a viable and self-sustainingindustrial sector.

Table 3.11: PROTECTION OF AGRICULTURE RELATIVE TO MANUFACTURING:EGYPT AND SELECTED DEVELOPING COUNTRIES

Country Year Relative Protection Ratio a/

1. Egypt 1981 0.572. Nigeria 1974 0.353. Colombia 1978 0.494. Brazil 1980 0.655. Ecuador 1983 0.656. Peru b/ 1981 0.687. Philippines 1974 0.768. Turkey 1981 0.779. Mexico 1980 0.8810. Korea b/ 1982 1.36

a/ Calculated as (l+EPRa)/(l+EPRm) where EPRa and EPRm are the effective ratesof protection for agriculture and the manufacturing sector, respectively.A ratio of 1.0 indicates that effective protection is equal in bothsectors, and less than one means protection of manufacturing is greatertban protection of agriculture.

b/ Here EPRa refers to primary sector.

Incentives for Private Investment

3.26 Despite the "open door" policy that Egypt has followed over the lastdecade, ostensibly to encourage the private sector, the public sector to alarge extent dominates and controls economic activity. Outside of theagricultural sector and a few service industries, the public sector -controlsthe bulk of production aiutlemployment in- the eeonomy. In order to reduce thebudgetary imbalances as stated earlier, the growth of investment and

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employment in the public sector will have to be curtailed sharply,particularly in the initial phase of the adjustment period. The privatesector should be encouraged to increase investments and create additionalproductive jobs for Egypt's growing population.

3.27 Real private investment is projected to grow at an annual rate of4.2X, during the period 1984/85 to 1993/94, as against real public investmentgrowth of 0.62 per annum (Table 3.6). In order for this investment growth tomaterialize, the Government needs to provide clear economic signals to theprivate sector regarding the Government's economic priorities and policies.Past policies, although undertaken with the best intentions, have in factprovided a mixed set of selective positive and negative signals. Althoughspecial laws and provisions, such as Law 43, have provided fiscal incentives(tax breaks) for private investment, the overall economic climate remainsuncertain. Moreover, the vast controls and licensing procedures make Egyptrelatively unattractive for private investment. As a result, the bulk ofprivate investment in the last decade has concentrated on activities whichprovide relatively quick returns such as banking and tourism facilities,l'and some highly protected sectors.

3.28 Changing the basic productive environment, through reform of theexchange rate trade policy, interest rates, energy pricing and liberalizationof production controls would make special provisions 'and exemptions tostimulate private activity unnecessary. It should be combined with removaland streamlining of licensing procedures. Moreover, with open competition fora larger volume of foreign exchange, once the three foreign exchange pools areunified the private sectors access to foreign exchange would increase.Changes in the exchange and trade regime would also increase export incentivesso that Egypt's relatively skilled but low wage labor force would be anattractive incentive for private investment in exportable goods.

Stimulating Exports

3.29 In view of the limited potential for increasing foreign exchangeinflows from oil exports, Suez Canal remittances and foreign assistance, otherthan debt relief, Egypt must make concerted efforts to stimulate the growth inagricultural and merchandise exports. Non-oil merchandise exports arecurrently not only a minor fraction (2C%) of total merchandise exports. Theirabsolute value has fallen from US$1.6 billion in 1974 to US$1.3 billion in1984/85. Under current policies, this trend would continue, with non-oilmerchandise exports declining to about US$1.0 billion by 1989/90 andcomprising mainly cotton and some textiles.

3.30 A major disincentive to exports arises from Egypt's trade regimewhich, in general, favors production for the domestic market over exports.Moreover, the exchange rate has generally tended to be overvalued. The usualpolicy response to balance of payments pressure has been to strengthen tradecontrols and pursue additional foreign borrowing. The overvaluation of theexchange rate and the protected domestic market are major reasons for thestagnation of manufactured exports in Egypt.

1/ See World Bank, "Fiscal Incentives Study," 1985.

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3.31 With the unification of the three exchange pools and subsequentflexible adjustments in the unified rate so as to maintain a competitive realeffective exchange rate, a major disincentive to exports would be removed. Ifthese measures are combined with reduction in tariffs and import controlsafter the initial phase of the adjustment program, non-oil merchandise exportsshould increase to US$2.8 billion by 1993/94 (Table 3.2).

3.32 These policy changes need to be combined with simplification of therebate system Egypt now has in place for refunding duties initially paid onimported inputs, when exports embodying these inputs are actually made. Therebate system should be operated by an agency concerned with exports, such asa reorganized Export Promotion Center or the new Export Development Bank.Provision for funding the rebates needs to be made in the allocation ofcustoms revenues or in the budget.

Impact on Living Standards

3.33 The standard of living in Egypt, as measured by quantifiable economicindicators has improved markedly in the last decade. Per capita income, foodintake, cloth and durable goods consumption, education and health standardsare higher today than ever. No doubt Egypt's cities are over crowded andadequate housing and sanitation in the cities is a major problem, butEgyptians today are better off than ever before. Egypt probably has thelowest level of malnutrition among countries with comparable levels of percapita income. This is a creditable achievement. Egypt in effect is a vastwelfare state which provides the bulk of its people cheap food, cheap fuel,and, for those living in rent-controlled housing, cheap though insufficientshelter. However, much of the growth in the standard of living has comeprimarily from external sources-oil and remittance income, foreign aid andexternal borrowings. Since this increased income was not matched byinereasing productivity, it is unsustainable under current economic conditions.

3.34 The challenge before the Egyptian Government is, therefore, to makecuts in the expenditure and subsidy programs so as to minimize the cost to thepoorest sections of the population. This would require restricting access tothe subsidy system only to the poor. A first step has been taken by theGovernment with the introduction of differentiated ration cards based onincome levels. Subsequent steps should include elimination of subsidies onseveral non-basic food items including meat, fish and poultry and limitingsubsidies on others such as edible oils and sugar. In addition, a mechanismwhich allows for regular adjustments of prices for all subsidized commoditiesto reflect cost increases needs to be established. The fall in per capitaconsumption during the period 1985/86 to 1989/90 can be interpreted as thecost of the stabilization program that Egypt would need to implement tocorrect its external and fiscal imbalances. However, without the adoption ofa reform program and the corresponding debt relief, the fall in growth andconsumption would be much greater. Moreover, the reform program would lead toincreased productivity and restore the economy to a growth path in which percapita private consumption would rise after 1989/90.

3.35 In summary, Egypt has the potential to return its economy to a highand sustainable growth path through vigorous and comprehensive economicreforms and with further assistance from the international community. The

- 81 -

Graph 19: Real Private Consumption

2~~~~~~~~~~~~~2

3 81z

, 17

1861 1864/6 18/ IiSJ6

Graph 20: Real Private Consumption Per Capita

'36'

l 3.1

2 7-{

1:z' ' w..w. MS ~ ~t

- 82 -

increased assistance is likely to be contingent on the adoption of acomprehensive reform program. The transition to a higher growth path wouldinvolve in the short run lower imports and consumption and higher inflation.The transition period would therefore require better targetting of consumersubsidies to reduce hardship on the poor. Although such a growth path mayseem severe in the short run, the alternative of continuing existing policieswould be even more severe. Consumption would fall more because Egypt would beunable to finance higher levels of imports. Moreover, the fall in growth andconsumption would continue indefinitely into the future.

- 83 -

StATISTICAL APPIx

teble No. Pop so.

Jbtien 1. Pq4lation Od iEmploymnt

1.1 POPUletion,Dstes of Sirth,ieath and Ktirat Ireas 61.2 IpIt@fnt by toiic Setor 5'1.3 we NWd Stalries by Sector U

Section It. National Accpt$

2.1 armss Dette Pradt St Current Prige 862.2 Grozs Dcstit PrO"t *t 196112 Prices B72.3 owurc. balem* at Current Prie aS2.4 Reource Saternc et 1981/82 Conetent Prices 8t2.5 Gross Fixed Inveetment et Current Priee 90

Section 111. Ialec of Paruunta

3.1 Salte Of Paents Current Accnt 913.2 Salane of Ps)nnts * Capital Accoimt 923.3 C'< ity Compttion of Exports 933.4 Cdity Composition of lorts 94

Setion IV. External Debt

4.1 External NsdIu. nd Loe Ter Debt utstandinpIncludife Ulndisboed s of IW 3D 19 5 *

4.2 Structure of CUtatorudin External Obtigtione - II Psblie 96

Section V. P"li Fint

S.t1 Siry of fiscat .Qrotioe 9?5.2 Govewent Revel 96S.3 Govetn t Owrent tpenditue 99S.4 "ltli Setor Sevins at Current Price 1005.S ftinoirg of "iti setor sapet Deficit 1i0S.6 Direct si*idiss Paid from the Spiael fund for S*sidies

_a the tresury hind 102s.r Tredie preroti0om of the 5uerl Auttority for SptWy

of Cdities 1035.6 Pries of Swply Crdities 1045.9 Ptbtic Sector ItmUtent Expnditure 10t

5.10 traufor of Profits to Central overnt frm P"bticEmerprie 106

section VI. "anatery Statisties

6.1 Nonwtery Turvey 1076.2 balac Shet of the teCtrot S* of Egypt 106.3 Balence Sheot of Crciat sEan 1096.4 Factorc Affecting Ibneatry Exion 1106.S Structur *f Intert totes 110

Section VIt. Agricutturat statistics

7.1 Produtton of aojor Agriculturtl Crep 1117.2 Cotton Production 1127.3 teat wd Pouttry Prodjction 1147.4 total Costs of Proction by Crops 1147.5 Irdices of Agricultural Proaktion nd Ylotd 1157.6 Ammunced Cooperative Prices for Selected Agricultural Crops 11l

Section VIII. InEstriel statistics

8.1 Output of Setected Irl trifl Prodckts 1168.2 Production end Diatrfibtion of IrAstriat Goods 1178.3 Ineb of trAtrit Proft tion 11

Section 1i. inw-gy Statisitit

9.1 Prodtion Nd Dfitriution of Crn Petrolen t99.2 ttturot ae Reserves Nt eP itton 1209.3 Petrole Prodt5 ad en Saltn 1219.4 Emports an Impor of C1 n Petroltn wd prct t22

9.5 Structureo of Petroleum Smstic,1923 1239.b Structure of Petrol.. Smotic price,i/4 1239.6 Petrolt IWort Pries 1249.7 Irotetled Cpaiefty.lnrgy Gented eW Peek Lod,1956 - 196 125

9.85 Ar.et Grauth Rates dof numy Value 1269.Sb Growth of Energy Sold by Zone,1981/2 - 82/3 1269.8c Growth of Enrgy Sotd by Zome,19112/83 * 834 126

Setitn X. Touris Statistics

10.1 tocrist Activity 12?

Section Xi. Otr Setor

11.1 Su Celt Traffic 127

Setion XII. Prie

12.1 ii,olesalo Price Indea (1965/66 . 100) 1212.2 Conmmer Price 0I91e for Urban POPtstiontWt 67 * tOO) i2n12.3 Dofatorts (1901/2 S 100) 1212.4 Iort * Iort () Prfice Indicee (1981/U eliO) tlO

- 84 -

Table 1.1: POPULATION, RATES OF BIRTH, DEATH AND NATURAL INCREASE

1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

Populeation(thouands) 36110 36953 37838 38794 39767 40889 42126 43314 44525 45755 47191

Birth Rates(per thouswad) 35.2 36.1 36.6 37.5 37.4 40.2 37.5 37.0 37.3 37.6 38.4

Death Rates(per thousn) 12.7 12.1 11.8 11.8 10.5 10.9 10.0 10.7 10.4 10.0 9.4

Rote of NaturalIncrease (per

thoused) 23.1 24.0 24.8 25.7 26.9 29.3 27.5 26.8 26.9 27.6 29.0

Growth Rate CX) 2.5 2.3 2.5 2.5 2.5 2.8 3.0 2.8 2.8 2.8 3.1

Source: Central Asency for Pubifc Mobilization and Statistics1/ Includes Egyptians tiving abroad,estimated in the 1976 census at

1.425 million; before 1970 the nwuber of Egyptians living abroadwas ngltigible.

Table 1.2: EMPLOYMENT BY ECONOMIC SECTOR(in Thousands of Persons)

1/1974 1975 1976 1977 1978 1979 1980/81 1981/82

Comuiodity Sectors 5758 5931 5848 5911 6082 6262 6457 6565

Agriculture 42t 428 41 40Z 4T1 4165 4O 4248Industry, Petroteum

& Mining 1150 1175 1200 1247 1297 1351 1450 1487Electricity 38 41 47 48 52 53 63 64

Public Utilitties 43 so 53 55 60 64 64 66Construction 315 447 480 457 538 629 680 700

Distribution Sectors 1280 1371 1429 1495 1543 1578 1677 1749

Tronsportation, Com.& Storage 397 404 415 444 449 452 460 483

Trade & Finance 883 967 1014 1051 1094 1126 1217 1266

Service Sectors 1992 2131 2228 2481 2705 2872 3046 3198

Housing 139 143 4 147 155 66 74Other Services 2/ 1853 1988 2084 2336 2558 2717 2880 3024

Total 9030 9433 9505 988r 10330 10712 11180 11512

Source: Ministry of Plawing and IB0D estimates.

1/ Ministry of Plaming estimates for 1981/82 were adjusted toretain cprabitity Wt earlier years.

2/ for 1978*1981/8211IRD estimtesos assus annut growth rates of 9.5.6.2,6.0 and 5.0 percent respctvetly.

- 85 -

Table 1.3: WAGES AND SALARIES BY SECTOR(In millions of Egyptian pounds)

1974 197S 1976 1977 1978 1979 1980/81 1981182

Com,od ity sectors 737.7 1067.0 1110.3 1228.5 1515.4 1698.0 2278.7 2659.5

Agriculture 298.1 649.1 440.1 483.0 530.9 584.0 739.2 786.6Industry, Petrotelm and I

Mining 341.4 454.0 484.6 5S4.7 734.1 812.5 1105.4 1406.0Electricity 13.5 15.5 17.8 21.2 30.5 32.1 49.3 58.5

PubLic Utilities 11.2 13.4 15.0 15.9 18.9 20.6 22.9 26.9Construction 73.5 135.0 152.8 153.7 201.0 248.8 361.9 381.5

Distribution Sectors 294.9 423.7 460.6 S8S.7 661.2 755.7 1487.2 1703.2

Trans., Comm.,and Storage 122.2 153.1 162.9 186.1 207.4 219.7 287.8 434.9Trade and Finance 172.7 270.6 297.7 399.6 453.8 536.0 1199.4 1268.3

Service Sectors 736.5 871.6 1012.4 1119.0 1421.3 1660.2 2339.5 3081.4

Housing 11.4 13.5 14.5 1S.9 17.0 19.3 48.1 58.4Other Services 725.1 858.1 997.9 1103.1 1404.3 1640.9 2291.4 3023.0

Total 1769.1 2362.3 2583.3 2933.2 3597.9 4113.9 610S.4 7444.1

Source: Ministry of PLanming

1/ Preliminary.

- 86 -

Table 2.1: GROSS DOMESTIC PRODUCT AT CURRENT PRICES(In millions of Egyptian rounds)

Estimated1974 1975 1976 1977 1978 1979 1980/81 1981/82 1982/83 1983/84 1984/85

Connodity Sectors M23 2828 3359 4089 4869 6867 9571 10516 11905 13897 16344

Agriculture 1280 1468 1"44 2038 2286 2530 3326 3743 4353 5157 6131Industry & Nining 746 880 993 1120 1319 1650 2144 2670 3147 3784 4577Petroteta 112 149 247 468 626 1908 3105 2885 2936 3139 3389Electricity & Pubtioutilities 63 88 96 106 121 132 157 182 217 260 310

Construction 129 243 279 3S7 517 647 839 1036 1252 1557 1937

Distribution Sectors 807 1032 1355 1679 2233 3059 4175 5038 5961 7067 8590

Trans., Cam., & Store 180 220 260 322 395 586 768 859 1026 1206 1404Suez Canal *3 40 141 169 294 406 543 630 671 695 823Trade, Finance& Insurance 630 m 954 1188 1544 2067 2864 3549 4264 5166 6363

Servico Sectors 1058 1196 1451 1766 1919 2175 2806 3529 4145 5024 6011

Housing 203 209 222 244 262 M87 321 373 421 529 661Other Services 8S5 987 1229 1522 1657 1888 2485 3156 3724 4495 5350(Tourism) (72) (99) (127) (134) (167) (190) (247)1/ (228)

GDP at Factor Cost 4197 S056 6165 7534 9021 12101 16552 19083 22011 25988 30945

Not Indir6ct Taxes 142 162 562 810 774 604 768 1088 1248 1500 1682

GDP at Market Prices 4339 5218 6727 8344 9795 12705 17320 20171 23259 27488 32627

Source: Ministry of Planning and IBRD estimate.i/ The 1980/81 figure we derived by assum in the sae growth rate as for other services.

- 87 -

Table 2.2: GROSS DOMESTIC PRODUCT AT CONSTANT 1981/82 PRICES(In millions of Eeyntian Pounds)

Estimate19- 4 1975 1976 197r 1978 1979 1980/81 1981/82 1982/83 1983/84 1984/8S

Commodity Sectors 5711 6320 6834 7506 8349 8934 10134 10516 11120 117s5 12492

Agrfculture 3122 3314 3360 3266 3448 3s58 3780 3743 3856 3937 4036InfJstry B Nining 1545 4 1m 1892 1999 2154 2445 2670 2864 2994 3146

Petrotma 481 677 1029 1592 1938 2141 2m 2885 3091 3427 3821Electrcifty & Pubtlc

utlftfies 80 107 117 131 151 154 164 182 202 221 238Construction 483 s77 555 625 813 896 968 1036 1107 1177 12S1

Distribution Sectors 1804 2123 2531 2856 3309 4037 4726 S038 S372 s573 5878

Trans.,Coam.,&Storage 267 314 350 413 475 696 803 8s9 921 966 996Suel Canal *7 90 318 384 4S1 s2s 631 630 640 627 657

Trade, Financ& Insurance 1544 1719 1863 2059 2383 2816 3292 3549 3811 3980 4225

Service Sectors 2200 2252 2742 2890 2775 2805 3201 3529 3743 3928 4073

Mousing 207 213 229 248 264 284 325 373 418 470 523Other Services 1993 2039 2513 2642 2511 2521 2876 3156 3325 3458 3550

(Tourism) (163) (195) (224) (210) (238) (248) (285)1/ (228)

GOP at Factor Cost 9715 10695 12107 13252 14433 15776 18061 19083 20235 212S7 22443

Net Indirect Taxes 766 723 981 1516 1189 789 847 1088 1143 1219 1217

GDP at Market Prices 10481 11418 13088 14768 15622 16565 18908 20171 21378 22476 23660

Source: Ministry of Planning and ItRO estimate.1/ The same grouth rate for other services was applied.

- 88 -

Table 2.3: RESOURCE BALANCE AT CURRENT PRICES(In Millions of Egyptian Pounds)

Estimated 1974 1975 1976 197 1978 1979 1980/81 1981/82 1982/83 1983/84 1984/8S

GDP at market prices 4339 5218 6727 8344 9795 12705 17320 20171 23259 27488 32ar7-

Resource gap (import-export) 726 1101 789 894 1496 2364 2673 3005 3173 4526 4005

*Imports of goods and nfs 1/ 1616 2154 2287 27r0 3626 6141 8453 9468 9921 12434 13593

*Exports of goods and nfa 1/ 890 1053 1498 1876 2130 377 5780 6463 6748 7908 9588

Total resources (GDP + resourcegap) 5065 6319 7516 9238 11291 15069 19993 23176 26432 32014 36632

Final consumption 4090 4578 5606 6804 8190 10896 14882 17029 19305 24066 27685

Public 899 1298 1670 1628 2012 2172 3294 4203 5483 6588 7628Private 3191 3280 3936 5176 6178 8724 11588 12826 13822 1741,3 20057

Gross investment 975 1741 1910 2434 3101 4173 5111 61..7 7127 7rvJ 8947

aross fixed Investment 685 1282 1471 1873 2685 3763 4702 5947 6913 7783 8718

* Publif 582 863 980 1505 2230 2847 3306 4200 4900 5404 6400Private 103 419 491 368 455 916 1396 1747 2013 2379 2318

Changes in stocks 290 459 439 561 416 410 409 200 214 165 229

* Public 174 275 263 337 250 270 264 129 2/ 107 114 156Private 116 184 176 224 166 140 145 71 107 51 73

Source: Ninistry of Ptuming and Central. Bank of Egypt end 1910 estimates.

I/ Foltowing exchange rates have been used;1979: 1.00LEu1.43 US$;

1980/81: 1.OOLE-1.35 US; 1981/82: 1.OOLEu1.232 US$;1982/83: t.OOLE-1.164USS; 1983/84: 1.OOLE-t.074 USS;1984/85: 1.OOLE0I.929USS.

2/ tM10 estimat assunes the same share as in the previous year.

- 89 -

Table 2.4: RESOURCE BALANCE AT 1981/82 CONSTANT PRICES(In millions of Eeyvtian Pounds)

1974 1973 1976 1977 1978 1979 1980/81 1981/82 1982/83 1983/84 1984/85

Gross domestic product(at m.p) 10481 11418 13088 14768 15622 16565 18908 20171 21378 22476 23660

Terms of trado effect 197 '446 -678 -m -940 -20 591 0 -117 101 54

Gross domestic incao 10678 10972 12410 13991 14682 16545 19499 20171 21261 22577 23714

Resource Gap 2626 5770 2499 2482 2881 3391 3174 3005 2994 4067 3137

nrports of goods and nfs 6086 7347 6952 ?330 7580 8810 10036 9468 9363 11175 10644

Capacity to inport 3460 3577 4453 4848 4699 5419 6862 643 6369 7108 7507

Exports of goods nd nfs 3263 4023 5131 5625 5639 5439 6271 6463 6486 7007 7453

Totat Expenditue 13304 14742 14909 16473 17563 19936 22673 23176 24255 26644 26851

ConrwAtion 10926 11022 11200 12291 12907 14733 17124 17029 17704 20234 20410

Pubtlc 2404 3128 3333 2939 3174 2935 3791 4203 5030 5541 5625Private 8522 7894 7867 9352 9733 11798 13333 12826 12674 14693 14785

tnvestment 2378 3720 3709 4182 4656 5203 5549 6147 6551 6410 6441

Pubtic 1844 2432 2414 3165 3724 3887 3876 4329 4602 4450 4720Private 534 1288 129S 1017 932 1316 1673 1818 1949 1960 1721

Oomestfc Sevings *248 '50 1210 1700 1775 1812 2375 3142 3557 2343 3304

Net Factor incme 72 '12 573 588 1194 1272 *000 123 585 1034 89

Current Transfrs 44 83 121 78 59 82 53 41 20 20 18

National Savings *132 145 1904 2366 3028 3166 3428 3306 4162 3397 3411

Souwce: Mnnist a o -Csnin and Central Bank of Egypt and IBRD estimaeteR

- 90 -

Table 2.5: GROSS FIXED INIVESTMENT AT CURRENT PRICES(In millions of Eavntian Pounds)

E S T I M A T E D1974 1975 1976 1977 1978 1979 1980/81 1981/82 1982/A13 1983/84 1984/85

Commodity Sectors 390 633 847 1136 1587 2275 2869 3559 3774 4370 4911

Agri cultur 54- 9 4 98 1746 1WF WS8 374 V2 5WO 689 77i Industry & Nining 192 287 379 561 765 1010 121S 1483 1313 1543 1716

Potroleum 1/ 74 122 186 206 201 448 594 752 906 979 1202Electricity & Public

Utilities 59 99 104 175 298 399 557 700 819 966 996Construction 11 31 80 48 132 160 129 152 156 193 218

Distribution Sectors 198 399 399 473 729 974 1060 1360 1998 2032 2162

Trans., Com.,& Storage 2/ 190 384 373 443 692 904 964 1119 17M 1761 1844

Suea Canat (0) (58) (71) (102) (305) (270) (200) (157) (84) (107) (125)Trade ad Finance 8 1S 26 30 37 70 96 241 220 271 318

Service Sectors 97 250 225 264 368 514 773 1028 1141 1381 1645

Housing 53 177 128 126 156 221 450 581 675 806 1001Other Service 44 73 97 138 212 293 323 447 466 575 644

Gross Fixed Investment 685 1282 1471 1873 2685 3763 4702 5947 6913 7783 8718

Less: Expenditures for thePurchase of Land 5 17 21 35 47 58 52 64 0 0 0

Investment Expenditure 680 1265 1450 1838 2638 3705 4650 5883 6913 7783 8718

Public Sector 578 852 966 1477 2191 2803 3270 4196 4900 5404 6400Private Sector 102 413 484 361 447 902 1380 1687 2013 2379 2318

meno:Foreign Investment 34 88 182 204 218 497 620 718 830 835 1037

Oil Conpanies i2 81 is5 i31 13m 371 482 568 644 698 876Law 43 Companies 2 7 27 49 82 126 138 150 186 137 161

Source: Ministry of Plonming and ISRD staff estimates.

1/ Exploration and production by foreign end donestic companies.2/ Includes Suez.3/ ISRD estimates for private inmestment.

- 91 -

Table 3.1: BALANCA OF PAYMENTS - CURRENT ACCOUNT(In million of US dollars)

Estimated1974 1975 - 1976 1977 1978 1979 1980/81 1981/82 1982/83 1983/84 1984/85

Trade balance *1800 -2733 .2490 2764 3440 3830 4717 -4601 -4401 -5333 -5056

Merchandise exports, f.o.b. 1818 1875 2169 2346 2558 3987 5617 S779 5250 S935 6249

Petroleut 4 7 - 828 I 126I IiiS 49 4166 9 4955Egypt (187) (289) (644) (720) (802) (1878) (3179) (3329) (2808) (2964) (2891)

Foreign companies (64) (184) (184) (292) (460) (947) (1310) (1340) (1357) (1575) (2064)

Non-Petrolsu S 1567 1402 1341 1334 1296 1162 1128 1110 1085 1397 1294Cotton (663) (371) (312) (457; (286) (3U8) (330) (380) (314) (452) (414)

Other agriculture (194) (155) (231) (260) (223) (200) (210) (190) (159) (211) (194)Textites (366) (478) (301) (300) (272) (280) (290) (280) (201) (267) (334)

Other manufactures (344) (398) (497) (317) (515) (334) (298) (260) (411) (467) (352)

Merchandise ilmorts, c.i.f. -3618 -4608 -4659 5110 -5998 -781? -10334 -10380 -9651 -11268 -11305

Wheat nd flour -798 *642 -547 -600 -841 792 1 O iA 1130 3 1056 -Other agriculture -247 -444 -748 -500 -696 -990 -1610 -15S0 -1561 -2218

intermediate goods -1513 -1939 -1404 -1466 -16'3 *2113 -2707 -3425 -3189 -3891Petroleum (-444) (-320) (-263) (-135) (-14k' (-243) (-335) (-505) (-493) (-514) (-424)

Other int. goods (-1069) (-1619) (-1141) (-1331) (-1524) (-1870) (-237 2) (-2920) (-2696) (-33M7)Capital goods -588 -1090 -1445 1894 -2022 -2921 -3781 -3175 -3132 -2900

Domestic coTp. (-506) (-865) (-1051) (-1500) (-1700) (-2390) (-3131) (-2475) (-2382) (-2150)Foreign comp. (-82) (-225) (-394) (-394) (-322) (-531) (-650) (-700) (-750) (-750) (-814)

manuf. cons. goods -4n -493 -515 -650 -766 -1001 -1150 -1100 -935 -1203

Net non-factor services 92 95 627 773 927 540 1108 898 708 471 1335

Receipts 433 628 1150 1542 1541 1414 2186 2183 2604 2558 2658

Tourism 265 332 464 ?8 702 601 712 611 304 1/ 288 1/ 409 1/Suez Canal 0 85 311 428 514 589 780 909 957 974 897

Other n.f.s. receipts 168 211 375 386 325 224 694 663 1343 1296 1352

Payments -341 -533 -523 -769 -614 -964 -1078 -1285 -1896 -2087 -1323 2/

Resource Salance -1708 -2638 -1863 -1991 -2513 -338 -3609 -3703 -3693 -4861 -3721

Net factor services 70 122 413 472 1098 1376 1190 151 743 1335 113

Receipts 276 452 827 1010 1905 2751 3259 2403 3639 4477 4296

Workers, remittances 189 366 755 897 1761 2445 285S 1935 3166 3931 3496Other f.s. receipts 87 86 72 113 144 306 404 468 473 546 800

Payments -206 -330 -414 -538 -807 -1375 -2069 -2252 -2896 *3142 -4183

Interests-officiat -51 -89 -77 -292 -314 *150 *759) -912) -1080) 1167) -819)Interests-private -18 -26 -34 -43 -72 -86 ) ) -209)

Profits transf. abroad -50 -140 -140 -219 -392 -947 -1310 -1340 -1357 -1575 -2064Other f.s. payments -87 -75 -163 -21 -29 -192 0 0 -250 -400 -1300 2/

Net Private Transfers 42 90 87 63 54 89 63 51 26 26 22

Current account balance -1596 -2426 -1363 -1456 -1361 -1915 -2356 -3501 -2924 -3501 -3586

Current account receiptt 2569 3X45 4233 4961 6058 8241 11125 10416 11519 12996 13225Current account payments -4165 -5471 -5596 -6417 -7419 -10156 *13481 -13917 -14443 -16497 *16811

Source: ministry of Finnce, and ISRD estimates.

1/ Earnings from Egypt Air transfers from this category to that ofother nonfactor services.

2/ US$700 ailtion tramnferred from nonfactor payments to otherfactor service payments In ISRD staff est:mates of total interestdue on foreign debt.Prior to 1984/85,data for interest paymentswas incomplete.

- 92 -

Table 3.2: BALANCE OF PAYMENTS - CAPITAL ACCOUNT(In million of US dollars)

Estimated1974 1975 1976 197 1978 1979 1980/81 1981/82 1982/83 1983/84 1984/85

Current account balance -1596 -2426 -1363 -1456 -1361 -1915 -2356 *3501 *2924 *3501 -3586

Autonomous non-monetary capital 1417 2000 1871 2808 2337 2527 2280 2315 2512 2454 2729

Direct investment 87 225 444 477 387 1375 836 88s 966 897 964Official Capital Grants 1261 986 705 382 291 72 279 395 400 900 1050

Officiat loans (not) *21 730 565 2022 1546 818 941 990 857 862 779Disburme_nts (140) (881) (673) (2150) (1720) (1066) (1323) (146) (1172) C1428) (1252)

Repye _nts (-161) (-151) (-108) (-128) (-174) (-248) (-382) (-474) (-315) (-566) (-473)Private loans (net) 90 59 15s -73 113 262 224 4S 289 .205 :64Suppl1ers' credit 70 62 88 -84 83 253 234 65 90 -175 29

Disburamnts (295) (365) (501) (47) (684) (823) (1174) (1050) (1120) (82S) (979)Repayments (-225, (-303) (-413) (-551) (-601) (-570) (-940) (-985) (-1030) (-1000) (-950)

Other (net) 20 -3 69 11 30 9 -10 20 199 -30 -93

Balanco on non-monetarytransaction -179 5426 508 1352 976 612 -76 -1186 -412 *1047 -857

Arrears 1300

Source: Central Bank of Egypt INF end ISRO staff estimates

- 93 -

Table 3.3: COMMODITY COlLPOSITION OF EXPORTS(In million of US dollars) I/

o"c"rpti,n 196 1t 96? 196 1t69 19t0 9tn 1972 197 1974 1973 97 t9Tt 197T t197 low t1812 1 8 1983t9l

P.trot.09 43 i? Zs 9 9 1 1 251 473 6 I01t 5 9 4 4146 On39

*5 iT 13 6 5i i jf t TR is - 7- TO TM SW U HU*avwrns 5 6 1 1t 20 12 it Is 66 194 lot 29 460 94? 1310 136" 13$? isis

A9rt0Atw Goode 405 379 414 40 46 5t9 53t 64 916 49 rJ76 559 SR 619 1SR 5s0 466

* t-. §5 Ex ms so i s u a T L U! 13 IM SI In i a'* 4lc, 9 68 103 to 7t 36 9 64 1Q2 64 79 60 n n 2 9 30 9

' ttrw fNut 2 2 5 is 1i 2t tIt 4 to 4? 0 d 5n 53 21 47 IS 620.1. 4ww ptat09 Is 2t J 2 I9 21 15 Jt 41 35 33 6 61 25 3a 40 n

*otbas 6 8 16 24 26 as 3 n s 3p It 59 91 48 95 54 72 II

tt4tttI*I 8099t 145 46 192 241 n46 26t 349 5 4 74 48 621 697 140 448 385 48

~ IT ~I-- C Til iD 7T 147 TXW 3 UT 11f 1FB I UT*Cottt tuttitn SI 33 ?t 4 60 S 6 70 81 11 12 1 n In 126 92 68 2 22 39

otwrowseing ateeltba S 7 10 13 21 it 24 is so so 3t so Ss 55 70 43 36 3-fod stUF 10 9 14 Vi t9 ad I6 2t 14 50 40 $3 s0 S0 2t3 5 s

*05 4169I 1 7 9 II if *2 so 21 2? 47 40 49 3 is 8 18 36 37t .tot I. .1 . 4 5 * t2 It 14 2s *4 St 1 34 3n 92 1O9 n2113 96 134

I 0 it Ss 16 3 S 5S 36 4 # 5 44 4 7 t 4 14l 12 20 39 1 22 3 50

ratiot .pot 2t 613 sn 629 765 82 t60 914 1104 1441 172 1970 tl59 0180 4132 1058 S6" 5051 SS"9

0i0 Othts: Cootr8 t9Ws for t5tWc Nsbti.fntt O -st*tisticucA(0l")

I/ ltx tel etll s6t-19712 1.00W a * 2.50 uSt n9 79t 1.0aG * .12.s6 U

1919 1.0 to * 1.43 Us196VtI: 1.60a * 1.35 uS

1191182 1.t00W * 1.25 u.s198/t 1.60 *a 1.146 4196314: *.a0aUa 1.o075 t1 9

2. CA14S daten export te hot ditrtts capeablo 6015 exportat* o: v" itn t1he SatJ of 9aGt Ohio re bfwtd an contrOt

5,* tsti1t, dt to 469o difftrOnt fOW* P*tWt.

- 94 -

Table 3.4: COMODITY COMPOSITION OF :ILORTS 1/(In Percent of Total)

1974 1975 1976 197? 1978 1979 1M/80 1981/82 1982/83 193/84

Fuels 2.6 6.7 3.9 1.? 1.0 0.5 3.2 3.6 ii T i 4

Crude petrotet. 2/ 0.6 4I if .

Petroteue products 2/ 1.0 0.2 0.4 0.1 0.2 0.2 0.7 2.1 2.9 2.9Coke and cost 1.0 2.0 2.0 1.6 0.8 0.4 0.4 1.1 0.7 0.6

PrImsry comoditIes 32.0 18.7 16.0 13.4 11.5 12.2 12.5 14.5 11.3 9.6

wh et 2ii : Wui -i Ti 6i -z Ti T Tobacco 1.2 1.3 1.5 1.7 2.0 2.3 1.4 1.0 1.6 1.5MaIze 2.9 1.6 2.1 1.5 1.4 1.2 2.0 4.1 2.5 2.2woot 0.7 0.3 0.4 0.7 0.3 0.3 0.3 0.3 0.2 0.2

sesame 0.6 0.4 0.2 0.2 0.2 0.2 0.1 0.1 ... 0.2Other 1.3 1.3 1.8 2.5 1.3 1.8 0.9 0.7 0.9 1.3

tntermwdlsto commoditles 34.3 40.1 28.8 32.8 30.8 33.3 33.6 32.1 32.8 33.1

Animat fats ad v"etable oats . T7 1 i T olta V wax 0.6 1.2 0.4 0.7 0.4 0.4 0.4 0.8 0.7 0.5

Chemct., n.i.e. 6.7 6.1 4.6 5.6 5.1 4.4 4.5 4.2 4.0 5.1Fortitliw 3.2 2.2 1.2 0.r 0.9 0.5 0.8 0.8 0.4 0.3

Oytuffs and cotori1r 1.0 1.2 1.2 1.2 1.1 0.9 1.0 0.7 0.6 0.6utbwr wed rtrew produetr 0.6 0.7 1.4 0.7 1.2 0.5 0.8 0.8 0.7 0.8

wow d cork 3.2 3.2 2.4 5.5 4.0 3.7 5.3 3.8 3.8 4.1Paper amd paper prockicto 3.4 3.7 3.6 1.9 2.1 1.4 2.1 2.0 1.6 1.5

Iron cd stoet preducto 5.1 6.5 6.0 4.2 3.7 7.4 6.8 5.8 6.2 6.0Other wtate aWd products 1.1 1.0 0.7 0.2 1.0 0.6 0.7 0.4 0.4 0.5

etectrfcat prodact 1.0 t.4 1.2 1.2 2.1 t.0 0.9 1.1 1.4 1.1other 3.4 4.2 3.8 9.2 7.1 9.8 7.9 9.4 9.6 10.3

Capitat c oditi" 3/ 13.5 16.9 26.9 30.0 32.0 30.6 27.8 25.5 27.? 27.9

sua., and autofot) 0.T -4 i 3 4-0 i T T4 Ti Ti Otlhr mator vehIcle.) 3.4 3.4 0.5 0.4 0.4 1.2 1.3 0.3 0.6motor Vhiete pertc) 3.0 1.4 2.1 2.2 3.2 3.1 2.3 2.4 2.8 2.4

Other trmnspormtatoo) 1.1 2.4 2.3 0.9 0.8 1.6 1.1 0.8 1.3Textit. cmdiinry 1.3 1.2 2.7 2.4 3.0 1.8 1.4 1.4 1.6 1.3

ELectrical products 1.2 1.8 2.0 2.5 3.1 3.5 3.3 2.5 2.7 3.5Earth movlng eqlpant 0.6 0.9 2.4 2.0 2.0 2.5 2.2 1.9 1.7 1.4

Other 4.4 6.2 11.2 13.5 13.3 13.6 11.7 10.7 14.4 13.3

Conatr commoitite 1T.6 17.6 24.4 22.1 24.7 23.3 24.9 24.8 25.1 24.0

urtable 3/ i 1t Ti 7 6 6X T6 i Ti6 67- Autombi tea wd motorcyletS (3.2) (2.0) (2.2) (3.8) (3.1) (3.2) (2.6) (2.6) (3.2) (3.2)

Radio nd televiston eets (0.5) (0.3) (1.3) (1.7) (1.7) (1.2) (0.6) (1.0) (1.6) (1.4)other (0.5) (1.1) (2.2) (1.2) (1.8) (1.9) (1.5) (2.0) (1.9) (2.0)

rJurabies 13.4 14.2 1r.7 15.4 18.1 17.0 20.2 19.2 18.4 17.3Aeat ftour (3.2) (3.1) (2.1) (2.9) (3.0) (2.5) (2.4) (4.0) (2.9) (3.0)

Sugar (2.9) (2.?) (1.7) (.0) (1.7) (1.3) (2.9) (2.2) (1.2) (0.7)Tea, coffee ad cocoa (0.9) (1.0) (1.2) (1.7) (2.1) (1.9) (1.0) (0.8) (1.0) (1.1)

Animtl products (1.2) (1.7) (3.2) (4.1) (4.0) (4.4) (6.8) (5.0) (5.6) (5.0)Beans ard mentits (0.3) (1.0) (1.1) (0.2) (0.1) (0.2) (0.2) (0.5) (0.4) (0.3)

Medicines (0.4) (0.4) (0.7) (0.7) (0.9) (0.?) (0.6) (1.3) (1.1) (0.9)Dtfsnfectants & inreeticfde (2.3) (2.0) (1.0) (1.1) (1.2) (1.5) (1.0) (0.8) (0.8) (0.6)

Paper and paper products (0.4) (0.9) (0.9) (0.2) (0.1) (0.S) (0.1) (0.2) (0.2) (0.3)Other (1.8) (1.4) (6.8) (3.5) (5.0) (4.0) (4.7) (4.4) (5.2) (5.4)

Totat 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.1 100.5 100.0

SoUM*: Centrot Agency for Pubtic MobiltiotIon ard Statfattos

1/ the data are baed on customs records nd hee dtffer fromthe batlnce of paymdnta ftguree,sAtci are largety ba#d onexchane controt record.

2/ Petroteum ports are sartouy urderstated fn both customand exchan control r*cord.

3/ includes parts.

- 95 -

Table 4.1: EXTERNAL MNEDIUM' AND LONG-TERM DEBT OUTSTANDINGINCLUDING UNDISBURSED AS OF JUNE 30, 1985

DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS(In million of US dollars)

Type of Creditor Debt Outstanding Type of Creditor Debt Outstanding

Creditor Country Disbursed UndisburieZ Total Creditor Country Disbursed UndisbMrsed Total

Suppliers Credits 2062.6 901.2 2963.8 Bilateral Loans 10268.6 1465.7 11734.3

Multiple Landers 2062. 90.2 293 ustria 46.2 28.3 74.6gelgius 7.0 0.7 7.7

Financial InstitutiOns 794.4 321.6 1116.0 8ulgaris 10.2 10.2Canada 223.3 36.4 259.7

Austria 16.? - * 16.? Chfna 46.1 . 46.1France 250.2 263.6 513.8 Czechoslovakia 66.3 44.7 111.0

aermany (Fed. Rep.) 27.5 22.9 50.4 Dmnrk 37.8 17.8 55.6Norway 20.7 20.7 finland 8.5 28.1 36.6Sweden 12.3 12.3 France 151.9 183.9 335.8

Switzerland 8.4 35.1 43.5 Gersany (DM. Rep.) 72.6 71.5 144.1United Kingdom 127.9 127.9 Germany (Fed. Rep.) 703.2 317.2 1020.4

USA 155.6 15S.6 Hurngry 15.0 15.0Multiple Landers 175.0 175.0 Iran 200.0 200.0

Italy 131.3 25.2 156.5Bonds 8.5 8.5 Japan 634.9 590.4 1225.3

Kuwait 1102 0 - 1102.0Switzerland 2.0 -i:F Libya 134.5 134.5

Multiple Lenders 6.5 6.5 Netherlands 34.5 24.8 59.3Norway 68.6 * 68.6

Multilateral Loans 3890.9 1042.4 4933.3 Poland 0.7 0.7Qatar 82.9 * 82.9

African Development Btnk 105 8 0T: 135.8 aiamnia 267.4 - 267.4African Developsant Fund 31.4 40.0 71.4 Saudi Arabia 959.5 959.5

AFESO 99.1 99.1 SpainArab Montary Fund - - Switzerland 22.0 0.1 22.1

European Investment Bank 53.6 23.0 76.6 United Arab Eirates 280.1 280.1Gulf Org. for Egypt (G(OE) 1725.0 - 1?25.0 United Kingdom

IBRO 981.3 725.2 1706.5 United States 4792.3 96.7 4889.0IDA 771.0 148.4 919.4 USSR 169.6 * 169.6

IMF Trust Fund 153.1 * 1S3.1 Yugoslavia 0.1 0.1Islamic Dev. Bank 7.0 7 7.0OPEC Special Fund 19.4 - 19.4 Total External Public Debt 17025.0 3730.9 20755.9

Private Non-guaranteed Debt 800.0 800.0

Total Externsl Debt 17825.0 3730.9 21555.9

Source: Ministry of Finance, Central Bank of Egypt and IBRDestimates.

- 96 -

Table 4.2: STRUCTURE OF OUTSTANDING EXTERNAL OBLIGATIONS - MLT PUBLIC(In million of US dollars)

asm 1975 19?? 1975 1979 s 1980/S 19411/8 19e2/85 1983/8A 1984/85

rn~~ ~~ ~ S~ - - X~- -s ms is iXs~

Supptlers Credit 311.2 19 6s1J. 13 627.3 8 661.7 t 1093.4 10 1361.9 10 1589.2 If 1720.3 11 1789.0 11 2062.6 12

Financiat Narkets 1/ 60.2 4 265.? 6 650.6 8 131.0 8 763.6 r 779.9 6 M33 5 973.6 6 910.5 6 802.9 5

ultiteltert Loi 22.0 1 103.9 2 1564.9 19 2331.0 23 2634.0 22 2973.2 23 315S.2 22 3384.0 22 3696.8 23 3890.9 23

of %idfch I 22.0 1 13.7 - 86.6 1 143.1 1 2s5.4 2 484.9 4 576.6 4 668.1 4 834.5 S 961.3 6IDA 84.1 2 167.9 2 212.5 2 267.4 2 3S?.? 3 447.2 3 S79.5 719.8 5 m.0 s

a m * . 1225.0 15 m2.0 I? 17.0 1s 12.0 13 1725.0 12 172S.0 11 1M.0 11 1725.0 10

81 tLatera Lwo 1250.? 76 3807.0 79 5249.6 6S 6176.1 62 6919.9 61 94.4 58 87r6.9 62 910?.? 60 9666.0 60 10268.6 60

SAC 452.7 28 610.6 3 1627.3 20 2497.4 25 3290.7 29 4540.6 33 53so.2 38 5683.0 37 6273.1 39 6861.? 40OPEC 122.5 r 2473.8 51 2930.? 36 3011.7 30 3026.2 2? 2e17.2 22 2809.0 20 2805.4 19 2769,5 1t 2758.9 16

CPE 615.5 41 22.6 1S 691.6 9 667.0 t 603.0 5 s86.6 5 617.T 4 616.4 4 623.1 4 64t.6 4

total KNUbT hIfo,bt 1644.1 100 4828.4 100 892.4 100 9919.8 100 11410.9 100 13069.4 100 1427.? 100 15185.6 100 16062.3 100 17025.0 100

MT Private Det * 18.0 n5.o 185.0 320.0 455.0 600.0 r00.0 800.0

TotaL NL? 1644.1 4828.4 8110.4 9994.8 11595.9 13389.4 14729.? 15785.6 16762.3 17825.0

sio.wee MinIstry ot Flnencentrot Sat of Egypt end 18 staffestimats.

I/ tnctuds bwnb.

- 97 -

Table 5.1: SUMMARY OF FISCAL OPERATIONS(In millions of Eeyitian Pounds)

Pral tm.Aet1974 1975 19?6 1977 1970 1979 19E0/81 t9Bt/a2 1962/83 1983/84 1984/85

485.0 - 92.0 "07.0 1416.3 421.3 1671.5 2392. 2821.0 3271.4 37T1.9 3930.0

Foreign trade Bud0 4 .$ . -M. W MW" 1TM. 1§T 1 MW"C* nata"ton 195.0 229.0 283.6 339.? 360.3 566.8 699.4 812.6 119f.4 1302.1 1444.0

*Other indirect 1/ 59.0 63.0 85.6 97.2 141.2 199.7 363.5 435.1 431.? 491.5 579.0

Direct tae 251.0 330.0 415.4 SS1.3 M.8 870.1 124.2 1944.9 2090.7 19S3.7 2350.0

*Personsl income 13"I -M -r. W9. -J 337T 170 UN n.a 12- .8 -71:.*wirnas profit 143.0 195.0 27.6 38.2 538.4 65.7 156.4 1577.? 1806.4 1506.0 1800.0

- Other 2/ 75.0 104.0 90.3 109.2 135.5 159.3 244.5 281.7 13.5 328.9 372.0

Total tax revwe 736.0 1022.0 1322.6 1967.3 2147.1 2S41.6 4216.6 4765.9 5362.1 S677.6 6280.0

Man-tex govenunt revem 3/ 110.0 138.0 118.8 135.7 147.2 267.2 461.6 606.4 834.2 990.0 1078.0

Total goverrfunt favaa 846.0 1160.0 1441.4 2103.0 2294.0 2808.8 4701.2 5372.3 6196.3 6667.6 7358.0

Pubife economic sector surptus 338.0 364.0 73.9 652.4 1012.3 875.0 2661.9 29O5.1 3552.6 3702.5 3955.0

* tranferred profita -i1 "isi 4.9 S.Z -i;: Wso 0 WM is 5M zFT s4. 3 T44.0-Invetment sef-finsening 150.0 210.0 331.0 268.0 473.0 374.0 964.4 1316.4 1507.1 1627.7 2011.0

Total public rerwu 11S4.0 1524.0 2015.3 275.4 3306.3 3683.8 7363.1 322.4 9748.9 10370.1 11313.0

Central. tocal ad service agenciescurrnt exniture 949.0 1352.0 1670.0 1701.0 2037.0 2494.? 3789.? 5089.0 6176.7 7608.1 8881.0

P%6tic econualo authorities currentdeficit 37.0 39.0 42.0 55.0 58.0 60.0 64.4 100.4 127.6 192.8 268.0

Stkfdfeas 410.0 622.0 434.0 650.0 710.0 1352.0 6/ 157t15 2909.2 2053.7 1986.6 2749.0 B/Net capitat expenditure 4/ 80.0 102.0 154.0 214.0 443.0 643.0 01.8 78.7 '154.0 601.3 542.0

Invetmlnt eXlediture 597.0 0 980.0 1549.0 2311.0 2547.0 3766.8 7/ 440.s 5019.8 5518.0 6556.0

Totat puLib expenditure 2073.0 3015.0 3280.0 4169.0 5559.0 7O%.? 10094.2 13438.1 14531.8 15906.8 18996.0

oross pktic Settor deficit 889.0 191.0 1264.7 113.6 z222.7 3412.9 2731.1 s115.7 4782.9 ss36.7 7683.0 8/

External finaning of defecita S/ 203.0 ss.o _i1 69 iiS 1135.3 P01.9 i2S2.2 1354.3 U Z042.0Domntic finacing of deficit 686.0 1181.0 776.7 805.6 1370.7 2277.6 1629.2 38W.S 3428.6 4096.2 5641.0 8/

Non-bank doestic finscing 372. 450.0 TW y7 M311 4f7 69f.0 T4.?1 22M.8 D2W1 Mi 24wS.a" fxinancig 314.0 731.0 437.0 471.0 827.0 1582.6 6/ 113.0 1606.6 1218.8 1994.2 3173.0 8/

Rm I ten

Totat xpanditure as X of GDP 47.8 57.8 48.8 50.0 56.8 55.9 58.3 66.5 62.6 57.9 58.2Total revna as X of GOP 27.3 29.2 30.0 33.0 33.8 29.0 42.5 41.2 42.0 37.7 34.7Totat deficit " S of COP 20.5 28.6 18.8 16.9 23.0 26.9 1S.8 25.3 20.6 20.2 23.5

Sourcet siniatry of Finc s IfJR0 staff estimteg.

1/ Includes: Stop taxes ad miscellaneous other taxe.21 lncludte: Taxes on properytestate dutis,taxes en ilvable property

and tocat goverrmwnt tax rem".3/ Includes: fedlt auc non-tax revenuteocal govereent

non-tax revem nd Wervice agnie reveam.4/ Incltud"s: WoVyut debt instatlLmnts on _stic SWd forefgn debt,

not cap1tat transfer to pbI economic authorities and ptilfcse4tor cofgan ed aca letot A cpftat expeiture by thegovensnt.

S/ gross foreign financing of tho budget defieft.6/ AdJurted to inctude Lg 122 dlli0n recived by G45C to cowr price

adjustmt a financed throug the banking ssteo in 1981/82.A sid Lfr amawt hs ban ecluebd fro the 1981/82 acceunt.

7/ Reflects deficit on an crals basis.Cash deficit ounts toLE 5860.? illion. the excess anmAnt of LE 1242.? reftects arrearas far bach 1979 I ihch wre fnanced In 19M1/82 throuo mwycreation.

4/ Includes aerre of 742 sill.LE

- 98 -

Table 5.2: GOVERNWNT REVENUE(In millions of Egyptian Pounds)

Prel .Actual1974 1975 1976 1977 1978 1979 1980/81 1981/82 1982/83 1983/84 1984/85

Total govorrasnt tax revOmw 76 102 1323 1967 2147 2542 4217 4767 5361 5677 6280

Direct taxe" BT 1 416 7 70 9 182 4 196 4 2350Persoalt foes tax (33) (31) (48) (55) (52) (55) (73) (86) (111) (129) (178)Euiniss profit taxes (143) (195) (278) (38?) (538) (656) (1506) (1578) (1806) (1506) (1800)Property taxes & estate dwties (21) (30) (19) (18) (22) (29) (43) (38) (12) (14) (16)

Loal goverlmnt (54) (74) C71) (91) (114) (130) (202) (244) (162) (315) (356)

Indirect taxes 485 692 90T 1416 1421 1672 2393 2821 3270 3713 3930Taxe n goods and seviess (195) (229) (283) (340) (360) (567) (699) (813) (1195) (1302) (1444)

IncludasExcise and cneorr duties 82 97 144 155 268 428 813 1195 1302 1444

Prfie differential 147 186 196 205 299 271

Foreign trado taxes (231) (400) (538) (979) (920) (905) (1330) (1573) (1644) (1920) (1907)1nctudese

Custo dutfes 231 400 466 S88 727 905 1330 1573 1644 1920 1907Exchange profts I t 72 391 193

Other Indirect taxes (5 63) (86) (97) (141) (200) (364) (435) (431) (491) (579)Includes

Stamps 61 82 89 126 155 168 239 2S4 308. 345miscellaneou 2 4 8 15 45 196 196 177 183 234

Non tax revnu 110 138 119 136 147 267 484 606 834 990 1078

Fow -2 38 IC? 5 4 -C 110 "2 T66 _T6_ 182Locatlo 13 18 1S 23 28 32 50 60 135 78 89Misellaneou 1/ 94 63 66 65 154 324 419 S33 748 807

(89) (109) (141) (157) (192)Total govserrsnt revew 846 1160 1442 2103 2294 2809 4701 5373 6195 6667 7358

Source: Ministry of Finance

I/ Services Agencies Reveu included. When available seperately,thisdata is shown In parentheses.

- 99 -

Table 5.3: GOVERNMENT CURRENT EXPENDITURE(In millions of Egyptian Pounds)

'Prel .Actua1974 1975 1976 1977 1978 1979 1980/81 1981/82 1982/8U 1983/84 1984/85

Genoral public Seevices 1/ 229 290 307 502 492 895 1735 2199 2834 3534 4258

Defense 2/ 340 587 756 599 709 m 1065 1475 1683 2121 2385

Education 163 193 240 244 297 365 401 608 706 834 985

Health 81 92 80 80 96 114 141 214 248 283 312

Coimunity end social servicos 4 5 29 30 54 86 106 109 125 132 159

Economic Services 48 57 72 69 90 101 134 199 236 266 314

Agriculture 19 21 61 62 84 48 61 99 118 138 168Irrigation 20 26 50 53 72 88 95 110

Transport-communication 9 10 11 7 6 3 20 28 30 33 36

Local ooverrnent expenditure 61 91 109 11? 135 162 210 285 345 439 468

Current expenditure from tresauryand Investment fund 3/ 23 37 77 60 164

Governamnt current expenditure 949 1352 1670 1701 2037 2495 3792 5089 6177 7609 8881

Source: Ministry of Finance

i/ Includes investment Fund current operating expenditure TreasuryFund outlay for pensions and contingencies, and services agenciesepnditure.

V/ Includes emergency fund deficit.3/ S0X of treasury and investment fund expenditure. Segirning 1979

expenditure from the Emorgency Fund has been allocated to functionalcategories.

- 100 -

Table 5.4: PUBLIC SECTOR SAVINGS AT CURRENT PRICES(In millions of Egyptian Pounds)

1974 1973 1976 19¶7 1978 1979 1980/81 1981/82 1982/83 1983/84 1984/85

Total grossgoverrusnt reveiw. 76.0 1022.0 1322.6 1967.3 2147.1 2541.6 4216.6 4765.9 5362.1 5677.6 6280.0

Total goveriuuntcowiption 1/ 949.0 1352.0 1670.0 1701.0 2037.0 2494.7 3m9.7 5089.0 6176.? 7608.1 8881.0

StusidIos 410.0 622.0 434.0 6S0.0 ?10.0 1352.0 1571.5 2909.2 2053.6 1986.6 2749.0

Net gowvrumnt avinp (-)6n.0 (-)952.0 (-)781.4 ()383.? (-)599.9 (-)1305.1 (-)114.6 ( )3232.3 (-)2868.2 (1)3917.1 (-)5350.0

Public sector financialsavins 2/ 340.0 364.0 573.9 668.4 1038.3 906.0 2680.5 2985.8 3592.6 3744.9 3994.3

other public swtorrevees 3/ 110.0 138.0 118.8 135.7 147.2 267.2 484.6 606.4 834.2 990.0 1078.0

Other public sectorexpendftures 4/ 117.0 141.0 196.0 269.0 501.0 M.0 966.2 899.1 1281.6 794.1 810.0

Social securitysurptus 245.0 253.0 268.7 225.0 357.0 491.0 622.1 898.2 1095.4 1361.5 1713.5

Stock accuujlation 174.0 21M.0 263.0 337.0 250.0 270.0 264.0 129.0 107.0 114.0 156.0

Totai p:tilic sectorsavings 129.0 (C)63.0 247.0 713.4 691.6 ()73.8 1940.4 4a8.0 1479.4 1499.2 781.8

Source: Ministry of Finance1/ Includes expenditure on interest2/ Includes: tranferred profits. investment self-financing and

development bonds held by public econmfic authorities andpublic soctor coranies

3/ Includes non-tax reve4/ Include econmic authorities current deficits and not capital

expendi tures

- 101 -

Table 5.5: FINANCING OF PUBLIC SECTOR BUDGET DEFICIT(In millions of Egyptian Pounds)

Prel .Ac-t

1974 1975 1976 1977 1978 1979 1980/81 1981/82 1982/83 1983/84 1984/85

overall fiscal deficit 889.0 1491.0 1264.7 1413.6 2252.7 3412.9 2731.1 s11S.7 4782.9 ss36.? 7683.0

Gross foreign ffrincinrg .9 608.2 7W.31U5 iV 1?3 1101.9 -125U 13Wr4- TF.3 M1.8

Credit facilities for the development plan I/ N.A. N.A. N.A. 368.6 697.2 854.5 829.3 852.2 1042.9 1348.1 1706.6

Cash and commodity toans N.A. N.A. N.A. 239.6 184.3 280.8 272.6 400.0 311.4 92.4 335.2of which: P... 480 N.A. .A. N.A. (70.5) (68.6) (138.6) (127.7) (195.5) (12.4) (72.0) (175.0)

Other U.S. commodity N.A. N.A. N.A. (69.8) (98.2) (75.4) (112.8) (29.3) (8S.0) (*) t*)GODE N.A. N.A. N.A. (9?.a) (-) (-) (-) <-) (-) l- )EEC N.A. N.A. N.A. (*) *) (7.8) (9.0 *) ( (* ( (*

18R0 N.A. N.A. N.A. (1 (6.5) (7.0) (7.3) (5.3) (-) (1 (Other N.A. N.A. N.A. (1.5) (11.0) (51.7) (15.8) (169.9) (54.0) (20.4) (160.2)

Domestic financing 686.0 1181.0 776.7 805.6 1370.7 2277.6 1629.2 3863.5 3428.6 4096.2 5641.2

Bank financing 34.0 l - 1. 0 42Tr 4T5 1f.0 1S82.o 1 iS.0- 16-6 1218.8 i9Z942 2431.2Won-bank financing 372.0 450.0 339.7 334.6 543.7 695.0 1476.2 2256.9 2209.8 2102.0 2468.0

of ,Aich: Social security surplus (245.0) (253.0) (268.7) (22S.0) (357.0) (491.0) (622.1) (898.2)(1095.4)(1361.5) (1713.5)Savings certificate (43.0) (SO.0) (54.0) (76.6) (135.7) (1S7.0) (228.8) (278.7) (329.4) (307.9) (366.5)

Postal savirs (18.0) (17.0) (19.0) (16.0) (25.0) (16.0) (21.6) (33.9) (70.2) (63.2) (61.9)Gov.rant bonds to

pubilc sector comsnies (2.0) (0) (1 (16.0) (26.0) (31.0) (18.6) (35.7) (40.0) (42.4) (39.3)Developmnt bonds m ) ) .) (*) ( ) ( ) () (595.0) (-) (266.0) (1)

Others (64.0) (130.0) (1.0) (1 (') ( ) (585.1) (415.4) (674.8) (61.0) (286.8)Arrears 742.0

MeNo Items

Foreign financing as X of totat financia g 22.8 20.8 38.5 43.0 39.2 33.3 40.3 24.5 28.3 26.0 26.6Bank financing as X of total financing 35.3 48.8 34.5 33.3 36.7 46.4 5.6 31.4 25.5 36.0 31.6 3/

Source: Ministry of Finance

i/ Mainly project loans2/ Adjusted to reflect LE 122 millfon received by GASC to cover price

adjustments and financed through bankifng system in 1981/823/ Excludes arrears finncing.

- 102 -

Table 5.6: DIRECT SUBSIDIES PAID FROM THE SPECIAL FUNDFOR SUBSIDIES AtD THE TREASURY FUND 1/(In millions of Egyptian Pounds)

Prel .Act.1974 1973 1976 1977 1976 1979 1980/81 1981/82 1982/83 1983/84 1984/85

Genral authority forsuppty coumodities 329.1 490.9 321.5 313.4 449.6 2/ 1001.9 3/ 1108.0 2190.5 1336.5 1208.8 8/1862.6 9/

Cairo and Alexandria publictransport authorities 4.1 5.9 10.2 11.5 17.6 27.4 27.0 41.2 38.4 56.3 71.2

Agricultural credit corporation 8.5 5.0 8.7 0.1 0.1 0.1 5.3 3.9 7.6 4.5 5.3

Agricultural stabilization fund 4/ * 81.5 34.2 34.7 38.3 101.9 119.1 227.9 159.1 142.3 135.3

Textile corporation 12.0 23.7 39.9 16.3 44.3 50.6 98.0 126.9 127.4 127.4 129.4

Petroleus corporation S/ 0.6 10.7 10.2 12.0 15.9 40.0 51.9 56.1 41.8 S5.5 54.3

Cooperative building authority 0.1 0.3 0.2 0.4 1.2 2.3 6.9 15.4 35.4 44.8 57.0

Governrmnt credit banks * 9.9 29.3 19.7 31.2 40.0 40.0 65.4 63.6

Press paper subsidies 3.0 2.5 6.6 4.1 3.8 6.6 6.5 _

industrial output subsidies - 72.6 41.3 58.3 114.2 116.4 117.5 126.3

Price adjustment furd 6/ 228.0 - -of which: GASC - - 124.0 - -

Other 7/ 55.1 1.1 6.1 16.7 37.0 63.0 59.2 86.6 151.1 164.1 243.7

Total 410.0 622.1 433.5 649.6 710.0 1352.0 1571.5 2909.2 2053.7 1986.6 2748.7

memo Item:

Wheat and flour subsidies as Xof total subsidies 53.0 42.0 40.0 40.0 40.0 47.0

Source: 1inistry of Finatce

1/ The Special Futd for Subsidies was established in 1975,prior towhich direct subsidies were included in various sections of thebudget

2/ Includes LE 122.1 million arrears financed in 1981/82In 1978 VW 1979, LE 190 million were allocated to 1979 andLE 140 million to 1978

3/ Includes LE 595 million expenditure incurred by GASC which wamonetized in 1981/82

4/ For fertilizers end seeds; includes Treasury Fund payments5/ For bottled gas and kerosene6/ The Price Adjustment Fund was established in 1977 to finance

the cost of phasing in the domestic price ipaect of comsoditiesisported at the parellel rather than the officfal exchange rate

7/ Treasury Fund Subsidy paymants to nonfinancial public enterprises;includes pesticide subad

8/ Includes -E2 mittllion in arrears9/ Includes LE742 million in arrears.

- 103 -

Table 5.7: TRADING OPERATIONS OF THE GENERAL AUTHORITYFOR SUPPLY OF CO4MODITIES

(In millions of Egyptian Pounds)

1974 197S 1976 1977 1978 19?; 1980/81 1981/82

Subsidies (Losses) 393.2 423.7 281.4 343.2 452.4 M9.3 1665.4 1828.0

Wheat & Flour 2I6.4 26_0.9 171.6 149 222.8 647.0 776.0 736.0maize 16.S 31.1 23.1 40.6 S3.8 40.7 104.0 141.0

Edible Fats &Oils (Ratiored) 55.3 72.2 43.2 54.6 137.4 176.4 133.4 125.0

Sugar (Rationed) 68.9 20.8 6.1 0.0 0.0 6.S 224.0 132.0Tea 0.0 0.0 0.0 18.3 12.8 56.2 26.5 29.0

Coffee 0.0 0.0 0.0 5.6 0.0 0.4 0.0 0.0Other 36.1 38.7 37.4 75.0 2S.6 71.1 401.5 665.0

Profits 63.1 15.0 31.2 12.6 29.3 0.0 0.7 2.8

Cottonseed 2.0 2.1 2.0 2.0 0.0 0.0 0.0 0.0Edible Oil

(*on-rationed) 8.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Tea 14.0 11.5 13.2 0.0 0.0 0.0 0.0 0.0

Sugar(Non-rationed) 36.0 0.0 0.0 8.6 26.1 0.0 0.0 0.0

Other 3.1 1.4 16.0 2.0 3.2 0.0 0.7 2.8

Total NetLosses (-) 1/ -330.1 -408.7 250.2 -330.6 -423.1 998.3 -1664.7 -1825.2

Source: General Authority for Supply Comsodities

1/ Not inclusive of administrative costs or settlement of arrears.

- 104 -

Table 5.8: PRICES OF SUPPLY COMM1ODITY(In LE per metric ton)

Jan.-June

1974 1975 1976 1977 1978 1979 1980 1980/81 1/ 1981/82 1982/83 1983/84 1984/85

Average import prices 2/Wheat 99.3 ?7.5 61.3 46.1 52.0 124.6 146.6 141.1 144.5 127.7 131.3 120.2

Wheat flour 111.1 80.6 93.2 70.6 74.0 174.9 223.4 241.8 199.0 136.1 150.7 156.1maize 70.8 58.8 53.4 42.3 27.0 113.5 115.3 144.6 122.0 128.1 145.6 125.3

Vegetable oil 347.8 346.5 222.3 280.0 262.0 561.0 448.6 492.2 459.3 354.7 574.4 501.8Lentils 227.2 214.5 188.6 158.3 119.0 27n.3 388.9 415.7 437.6 262.8 208.9 414.4Sesame 235.0 250.0 232.7 227.9 319.0 638.8 634.3 72.8 665.0 822.6 743.4 835.4

Teo 406.0 550.0 600.0 1000.0 910.0 1200.0 1450.0 1414.0 1278.0 1697.0 2007.8 1975.3Coffee 537.1 488.7 1045.3 2689.0 1450.0 2527.0 2666.8 2081.3 1423.3 1314.0 1225.6 1812.5

Edfble fats 260.0 247.5 229.6 252.8 311.0 628.0 633.9 498.9 602.9 554.9 * 457.0Frozen beef 416.2 300.0 305.0 517.8 436.0 1173.0 1127.8 1314.8 1079.0 1327.0 1402.4 1106.3

Sugar 286.0 208.1 147.6 96.6 86.0 186.0 394.0 516.0 273.6 166.6 218.1 147.7

Domestic buying prices 3/Wheat 43.3 46.7 46.7 46.7 63.3 70.0 83.3 83.3 83.3 104.2 83.3 83.3

Rice (paddy) 31.2 40.0 50.0 50.0 65.0 65.0 65.0 75.0 85.0 . 116.7 142.9Sesame 158.3 183.3 208.3 208.3 208.3 218.8 541.7 583.0 625.0 822.5 833.3

Horsobens 58.0 83.9 83.9 96.7 96.7 219.2 161.3 225.0 4/ 225.0 . 258.7 238.7Sugar S/ 45.5 63.6 72.7 .7 81.8 s 209.0 6/ 243.5 210.0 286.0 328.9

Domestic selling prices 3/ -Wheat 30.9 28.2 29.2 29.2 24.7 24.7 22.3 41.3 41.3 41.3 37.6 97.2

wheat flour 55.0 55.0 67.8 67.8 67.8 67.8 . 7/ 78.7 73.3 * 70.5 105.0Maize 33.0 33.0 33.0 33.0 60.0 60.0 60.0 60.0 60.0 66.1 59.7

Rice (bleached) 51.0 51.0 51.0 51.0 46.0 46.0 50.0 50.0 50.0 116.7 142.8Sesaes 110.0 110.0 276.0 276.0 450.0 450.0 450.0 450.0 450.0 499.5 820.0

Vegetable oil (rationed) 49.7 49.7 49.7 49.7 49.7 100.0 100.0 100.0 100.0 100.0 87.6 87.6Sugar (rationed) 70.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 94.4 94.4

Lentils 98.0 98.0 98.0 98.0 98.0 98.0 110.0 110.0 110.0 292.9 260.4Horsebeans 51.6 51.6 51.6 51.6 92.9 92.9 100.0 100.0 100.0 * 101.1

Vegetable oil (additional) 100.0 100.0 100.0 100.0 100.0 300.0 300.0 300.0 300.0 300.0 479.0 490.4Tea (Ceylon) 2178.0 2178.0 2178.0 2178.0 2600.0 2600.0 2600.0 2600.0 2600.0 * 1383.2 7246.8

Coffee (Brazilian) 760.0 760.0 760.0 2633.0 1840.0 ......... cost price -..- 2683.0 * 2683.0Sugar (additional) 250.0 245.0 245.0 245.0 245.0 245.0 300.0 300.0 300.0 300.0 289.8 309.1

Edible fats 150.0 200.0 220.0 220.0 250.0 250.0 250.0 250.0 250.0 * 150.0 147.1

Source: General Authority for Supply Commodities

1/ Fiscal year begirming July 1 and endigr Jure 30.2/ Average prices for imports contracted for during period.3/ Prices as of end of period.4/ Since May 1981.5/ Cane price divided by the average sugar extraction ratio(0.11)

to improve comparability with selLing price,the latter,howevr, includes also processing and distribution costs.

6/ Since July 1980.7/ Since Jure 30,1980,the following abeat flour prices have been

charged(in LE per metric ton): for European bakeries (70.7),shami (69.5), macaroni factories (82.1), sweet factories (120.8),tourist places (220.0).

- 105 -

4-able 5.9: PUBLIC SECTOR INVESTMENT EXPENDITURE(In millions of ERvptian Pounds)

Prel.Actual1974 1975 1976 1977 1978 1979 1980/81 1981/82 1982/83 1983/84 1984/85

General public services 15.2 24.1 75.1 98.4 101.1 148.8 370.9 57S.3 470.0 534.0 651.2

General ad1inistratfon -f - 4.7 3.1 1t! 4 50 83.6 100.8 T14-8 14.1 163.5Public order and safety 8.6 2.9 6.0 16.1 17.2 20.2 21.0 30.1 29.5 20.0 57.7

Local Pdeinistration 4.8 17.0 46.0 50.0 3S.5 74.6 266.3 444.4 325.? 371.9 430.0

Educatifn 23.0 39.8 41.1 38.7 82.1 82.8 104.4 164.9 126.1 186.4 243.6Helth 7.3 14.8 3.0 10.3 23.7 23.3 20.0 37.8 33.0 53.8 62.9Housing 45.2 68.9 220.9 144.7 201.1 318.4 363.7 524.7 S01.6 581.7 627.7

Commanity and socfal services 2.4 4.7 1.6 1.8 6.0 5.3 5.8 10.3 3.7 9.5 10.4

Economic services 461.9 749.6 465.7 589.2 981.4 1090.8 1259.5 1268.4 1748.5 1876.4 2637.3

Agriculture 54.5 93.1 70.7 74.7 i17.6 1 W.4 200.4 214.4 236.6 288.2 408.6Mining, petroleum end

manufacturing 248.8 360.5 148.8 73.5 100.6 103.2 146.3 144.3 206.9 244.4 190.5Electricity 33.1 47.9 57.7 102.5 210.7 206.0 384.9 298.6 436.8 417.1 931.5

Transportation andcoauznication 108.8 212.9 188.0 321.2 537.6 574.0 503.6 556.7 829.9 889.7 834.6

Trade and supply 11.7 22.7 0.4 6.6 14.6 29.5 22.0 46.3 33.2 31.1 39.1Tourism S.0 12.5 0.1 10.7 0.3 0.7 2.3 8.1 5.1 5.9 233.0

Other public investment 18.6 11.2 567.5 665.8 916.0 944.8 1642.5 1959.4 2136.9 2276.2 2323.3

Nonfinancial public - -

enterprises 1/ 522.8 647.3 886.9 911.2 1567.5 1822.7 2136.9 2276.2 2323.3Unallocated 2/ 18.6 11.2 44.7 18.5 29.1 33.6 *

Contrib. & advancement for invest. 75.0 136.7

Totat public sectorinvestment 573.6 913.1 1374.9 1548.9 2311.4 2614.2 3766.8 4540.8 5019.8 5518.0 6556.4

Adjustment for knowninvestment arrears 23.4 -13.0 *395.0 -67.2 - -

Pubtic sector investmantexpenditure 597.0 900.0 979.9 1548.9 2311.4 2547.0 3766.8 3/ 4540.8 5019.8 5518.0 6556.4

Source: Ninistry of Finance

1/ Since the abolition of the pubtic economic organizations at the endof 1975, no functional ctassification of public sector canpyinvestment has been avaltable.

2/ Inctudes Troasury Furd advance pewaynts and Investment Fundequity participation in joint ventures; excludes private sectorshare of joint venture Investments.

3/ Reflects deficit on accruals basis. Cash deficit amounts toLE 5860.7 million. The excess nouwt reflects arrears as far back as1979 which aere ffnanced in 1981/82 through money creation.

- 106 -

Table 5.10: TRANSFERS OF PROFITS TO CENTRAL GOVERNMENT FROM!PUBLIC ENTERPRISES(In millions of Egyptian Pounds)

PrA.ctual1974 19?5 1976 197 1976 1979 2/ 1980/81 1981/82 1982/83 1983/84 1984/85

Pubtic authorities 1/ 188.5 154.5 192.6 283.8 373.1 431.6 1623.8 1469.4 17m7.4 1820.1 1670.3

Agricultturo nd irrigation TI 1.9 0.S i:i 3. 0.3 22.8 8.3 40.6 39.9 58.8inductry and petroleuu 25.4 36.5 85.9 177.1 192.2 253.0 1342.0 1113.8 897.1 1074.5 943.4

Textile industry (11.8) (9.1) C.) C.) I*) * ) ( )) t ) t-)Petroteum industry (3.3) (17.S) (84.4) (177.1) (192.2) (253.0) (1339.5) (1109.8) (890.9) (1066.2) (936.1)

Other (10.3) (9.9) (1.5) I.) t ) ( ) (2.5) (4.0) (6.2) (8.3) (7.3)Electricity 8.3 * 2.8 *)

Transportation and Cms. 23.0 61.9 75.2 133.8 163.9 ) 215.3 268.3 391.4 350.9 310.2Suez Canal ( (14.2) (45.7) (57.6) (107.2) (14U.1) (179.3) (220.4) (321.1) (284.7) (226.2)

Other ( ) (8.8) (16.2) (17.6) (26.6) (1S.8) (36.0) (47.9) (70.3) (66.2) (84.0)finnco end ecenoriy 140.4 84.3 39.9 25.5 31.5 13.2 32.6 76.2 442.8 352.7 355.6

Cotton general orgnization (114.5) (54.0) (.) (.) (.) (.) (.) (.) (.) (.) (.Central sank (25.9) (23.1) (30.6) (20.5) (28.0) (10.8) (30.9) (76.2) (439.6) (348.2) (351.9)

Other (7.2) (9.3) (5.0) (3.5) (2.4) (1.7) ( ) (3.2) (4.5) (3.7)Supply ed international trad 5.6 5.8 * 0.5 0.7 * *

Houinr And construrtion 0.4 * 1.3 1.1 0.2 0.3 1.1 1.1 1.0Other 6.0 3.0 1.6 9.3 10.0 0.1 10.9 2.5 0.4 1.0 1.3

Ptic sector copaies SO 50.3 95.6 165.8 69.4 73.7 164.3 272.1 254.7 273.2

Cotton export profits - 7 *12.6 Other * - 93.9 153.2 69.4 73.7 164.3 272.1 254.7 273.2

Total 188.5 154.5 242.9 384.4 538.9 501.0 1697.5 1633.7 2045.5 2074.8 1943.5

Source: Ministry of Finance

i/ Includes transfers from the pubtlc economic organizations in 1975prior to their usiequent abolition

2/ There is a problm with the profit trasnfer figures for 1979.BSank staff estimates indicate a value of LE 1001 million for 1979.The resen behind the discrepancy betee<n the HOFf fiure adIBRD estinate is the chang in transactions accounting proceduresbetween the central governrent and public enterprises from accrualsto cash basis so that the difference shows up in ianuary-Jurw 1980accounts

- 107 -

Table 6.1: MONETARY SURVEY

(In millions of Egyntian Pounds)

End of period 1974 195 1976 1977 1978 19?9 1/ 1980 1980/81 2/1981/82 1982/83 1983/84 1984/85

Foreign assets (net) -184 -973 *921 *670 *2196 *2120 *1335 -964 -1378 116 *88 -212

Foreign assets 6i T45 1-i 176 = HU1 2 32NM 3U Z4699 5S 5887 6085foreign liabltities *750 *168S -1862 2206 *4249 4445- -4429 -4681 -6022 *5623 -5939 -6267IMF position (net) *43 *33 -80 -142 -267 -220 -191 -87 -55 *37 *36 -30

Domestic Credit 2693 3974 4565 5422 8673 11419 12484 15192 20859 24022 28708 34571

Ctaims on public services sector 1 3239 3680 6647? 942 16235 13000 9426 17233 20584Central and local goverrment (1707)(2436) (2896) (3382) (5955) (7627) (8243) (8303) (11031) (1248S) (14570) (16803)

Public authorities (197) (446) (343) (297) (692) (993) (1183) (1932) (1969) (1910) (2663) (3781)

Claims on households andenterprises 789 1092 1326 1742 2026 2799 3058 4957 7859 9627 11475 13987

Public sector companies (434) (645) (885) 1095) (1208) (1366) (1241) (1628) (2280) (2724) (3357) (4057)Private sector 3/ (335) (447) (441) (647) (818) (1433) (1817) (3329) (5579) (6903) (8118) (9930)

Unclassified assets 111 150 247 328 410 188 210 392 816 1004 874 943

Assets a liabilities 2620 3151 3891 5105 6889 9486 11359 14620 20297 24910 29494 35302

Money and quasi-morny (currency .private sector deposits) 1515 1882 2411 3185 4114 5211 6205 8342 12044 15432 4K480 20926

Currency 9W 11S 6 1 3b3 1 2 6sr 3020 36 -46I 6 7008 2884Deposits 567 726 1023 1435 1931 2554 3185 4664 7356 9411 11472 13042

Private sector demand 3/ (305) (405) (540) (782) (948) (855) (995) (1251) (1513) (1912) (2061) (2452)Private sector other 3/ (262) (321) (483) (653) (983) (1699) (2190) (3413) (5843) (7499) (9411) (10590)

Public sector deposits 704 796 931 1331 1794 3026 3649 4349 4973 5574 6551 8216Central and local govrnmwent (118) (117) (140) (155) (265) (339) (393) (1065) (988) (1301) (1519) (1726)

Public authorities (100) (132) (147) (258) (432) (1175) (1467) (1524) (1604) (1415) (1706) (2637)Public sector companies (486) (547) (644) (918) (1097) (1512) (1789) (1760) (2381) (2858) (3332) (3853)

Counterpart funds 142 171 156 142 125 105 83 54 17 3 10 6

Capital account 172 192 232 275 485 949 1110 1481 1961 2348 2760 3161

Unclassified liabilities 150 197 266 350 448 329 470 636 1035 1525 1878 2573

Interbank claims (net) -64 -86 -111 -176 -78 -134 -159 -272 79 -185 -457 -227

Foreign currency bank's deposit,with Central Bank, F/C * * * * 30 188 213 272 647

Memo ttem:Private foreign currency

deposits 4/ * * * 416 618 792 1136 1704 3214 3802 4042 4739

source: central Bank of Egypt 1iMF, and IBRO staff estimates

1/ Accounts of the central and local goverrnment and public authoritieshave been adjusted to take account of the reclassification of publicsector entities that occurred as a consequence of the budget reformat the begiming of 1980

2/ Fiscal year3/ Includes cooperatives and specialized banks4/ Includes earnarked deposits

- 108 -

Table 6.2: BALANCE SHEET OF THE CENTRAL BANK OF EGYPT(In millions of EeyDtian Pounds)

Ent of period 1974 1975 1976 1977 1978 1/ 1979 2/ 1980/81 1981/82 1982/83 1983/84 1984/8S

foreign assets (net) 244.3 *752.6 *923.S 1352.5 *316.9 -3077.6 -2129.5 20S9.7 *1328.7 -1138.6 -1249.5Foreign asse ts 220.9 265.4 TWTI 4344. S-9 0.3 761 1394.3 1681.2 1. 1989.9 1°2 8Foreign liabititles -401.7 *984.9 -1094.8 1S81.1 -3488.4 *3620.1 -3437.3 -3685.6 -3114.5 -3092.4 -3121.9IMF position (rnt) -43.5 *33.1 -80.1 -115.9 -266.8 *219.6 -86.5 *55.3 -37.3 -36.1 *3C.4

Domtic asets 1593.1 2293.7 2703.0 3511.3 6056.8 7353.0 8278.0 11310.6 12678.5 14487.6 16894.3Claim on public sector iT5 7 113.2 1593.0 I86.2 UM53.9 6078.6 60.1 1OS01.0 11615.0 1I04 1T0332Central ad local govt. 3/ * (1509.0) (1589.5) 1832.9) (4148.8) (5661.6) (5968.5) (998.7)C11257.9)(12789.7)(14744.9)Public authorities (4.2) (3.5) (30.3) (105.1) (417.0) (636.6) (512.3) (357.1) (314.5) (288.3)CLaimB on comerciel banks so.3 775.3 1104.9 1544.0 1632.8 1153.4 1358.2 259.0 319.9 306.5 432.3Claims on specialized bank 5.3 5.2 5.1 104.1 170.1 121.0 314.7 550.6 743.6 1076.9 1428.8

Unclassified assts 8.2 16.7 52.6 50.5 25.5 19.0 108.0 387.9 421.2 223.0 222.3

Assets a Liabilities 135t.0 1SS7.8 1832.1 2209.3 2917.4 4294.4 6256.5 9638.8 11771.0 13572.0 15867.1

Ieserve emney 1269.6 1460.2 1730.2 2082.6 2654.8 3402.2 4950.0 8283.2 10121.2 11501.0 13342.3Currency in circulation 947.6 1155.9 38?. 1749.5 2183.3 266.9 36W8.2 468.9 6020.9 700.7 7883. 9Currency in corc1elal bans 53.8 56.9 69.3 7n.0 89.9 121.9 17 .6 278.4 312.8 309.2 520.9Cau rciat banks' daposits 266.0 246.7 270.6 258.1 381.6 622.7 1021.4 3114.1 3559.9 3876.3 4599.4Speciaized banks deposits 2.2 0.7 2.3 * 0.7 75.8 202.8 227.6 307.8 338.1Public sector deposits 34.2 37.8 40.1 46.6 100.9 693.1 1050.8 1082.9 1286.3 1513.8 2062.9

Central and local govt. 3- 5 9 46. 100.0 9W.4 -50.9 ?OM.9 830.2 64.2 072.9Pubtl1 authorities 0.3 0.2 0.3 0.9 595.7 399.9 S57.0 456.1 549.6 990.0Counterpart funds 10.0 10.0 ...-... .. .. ..

Capital accoemts 36.7 37.8 47.4 48.4 150.6 179.6 230.0 225.7 261.8 289.6 336.7

Unclassified liabilitis" 6.5 12.0 14.6 31.7 11.1 19.9 25.7 47.0 101.7 266.8 125.2

Source: Central Bank of Egypt

1/ As from this year, foreign currency assets and liabilities valuedat uniffed (established) exchange rate rather than at the officialexchange rate.

2/ Adjusted to take into account the reclassification of public sectorentities that occurred as a consequence of the budget reformundortaken at the begiming of 1980

3/ Claims on central end local goverfuent plus counterpart of Treasurycoins and notes plus use of Fund Credit mirf IMF deposits

- 109 -

Table 6.3: BALANCE SHEET OF COIMERCIAL BANKS 1/(In millions of Egyptian Pounds)

End of Period 1974 1975 1976 1977 1978 2/ 1979 1980/81 1981/82 1982/83 1983/84 1984/85

Foreign assets (net) 33.1 221.1 1.5 707.7 969.7 957.6 116S.1 681.8 1212.5 1050.3 1067.0

Foreign assets 407-.9 49.3 769.1 1333.0 1729.8 1782.4 2589.3 3018.3 3721.0 3897.0 4181.9Foreign liabilities *374.8 -700.4 -767.6 -625.3 -760.1 -824.8 -1424.2 -2336.5 -2508.5 -2846.7 -3114.9

Reserves 381.5 385.3 451.2 495.4 505.4 722.9 1249.8 2681.3 3167.9 3598.1 4507.6

Cash 53.8 S 69.3 75.0 8T.9 1 74.6 278.4 312.8 9.2 520.9oeposits with Centrat Sank, N/C 3/ 327.7 328.4 381.9 420.4 41S.5 601.0 1075.2 2402.9 285S.1 3288.9 3986.7

Deposits with Central Bank, F/C 80.3 73.3 533.9 677.1 850.4 963.7

Domestic assets 1706.1 2456.4 2966.8 3454.5 4249.7 5217.9 8271.8 9807.0 11663.3 14527.6 18108.3

Claims on public ssctor 1357.1 2014.225 25 2911.5 3601.3 39iI 5 S258.2 4779.0 5503.9 7.486.1 9606.8Central end local goverrint (730.6) (927.1) (1306.7) (1549.4) (1806.0) (1965.4) (2334.3) (1042.6)(1226.7) (1780.4) (2058.0)

Public authorities (92.6) (441.7) (339.2) (266.8) (587.1) (575.5) (1295.8) (1456.4)(1552.7) (2348.8) (3492.3)PubLic sector cosanies (433.9) (645.4) (884.5) (1095.3) (1208.2) (1365.6) (1628.1) (2280.0)(2724.5) (3356.9) (4056.5)

Claims on private sector 153.2 235.5 262.1 441.4 581.7 1010.2 2538.6 4357.7 5221.0 6138.2 7224.2Claim on other financial

institutions 195.8 206.7 174.3 101.6 66.7 301.2 475.0 670.3 938.4 9033 1277.3Specialized banks 4/ (195.8) (206.7) (174.3) (101.6) (66.7) (136.2? (260.8) (429.7) (420.0) (453.7) (603.6)

Foreign currency banks (165.0) (214.2) (240.6) (518.4) (449.6) (673.7)

Unclassified assets 102.4 133.4 194.3 277.4 384.6 169.3 284.0 427.6 582.4 650.6 720.9

Assets * Liabilities 2223.2 2754.0 3613.8 4935.0 6109.4 7148.0 11044.0 14131.6 17303.2 20677.0 25367.5

Demand Deposits 303.2 405.6 544.1 782.4 947.6 854.3 120S.2 1498.0 1912.4 2060.5 2451.9Time and Savings Deposits 5/ 261.6 320.9 482.5 652.9 983.3 1698.8 3413.2 5843.1 7483.5 9381.0 11276.4

Public Sector Deposits 670.2 757.2 891.3 1283.7 1693.2 2332.8 3297.8 3890.2 4287.6 5043.2 6152.7

Central and local goverranent 84.2 79.1 99.9 108.3 164.9 241. 413.8 480.2 4 554.7 677Public authorities 100.2 131.4 147.1 257.4 431.2 579.4 1124.2 1028.7 959.2 1156.4 1647.3

Public sector companies 485.8 546.7 644.3 918.0 1097.1 1512.1 1759.8 2381.3 2857.6 3332.1 3852.7

Counterpart funds 131.7 160.7 15S.6 141.6 125.2 105.2 54.4 16.6 2.9 10.2 5.5

Credit from Central Bank 577.5 770.5 1104.9 1530.1 1588.9 1078.2 1212.9 167.2 301.5 367.3 450.5

Capital accounts 135.3 153.8 184.4 226.1 334.8 769.5 1250.5 1735.6 2086.2 2470.6 2824.5

undisbursed liabiLities 6/ 143.7 185.3 251.0 318.2 436.4 309.2 610.0 980.9 1229.1 1344.2 2206.0

Source: Central Bank of Egypt and ISRO staff estimates1/ N/C * national currency; F/C * foreign currency2/ Foreign currency assets and liabilities valued at unified

(established) exchange rate3/ For 1974 1978, data represents total deposits with Central Sank4/ For 1974 1978, data is for specialized and foreign currency banks5/ includes earmarked deposits6/ Unclassified liabilities plus interbank liabilities minus

interbank claims

- 110 -

Table 6.4: FACTORS AFFECTING MONETARY EXPANSION(In millions of Egyptian Pounds)

Charg Duuing Period 1975 1976 1977 1978 1979 1980/81 1/1981/82 1982/83 1983/84 1984/85

Foreign asts (net) *789 52 251 *1526 76 371 *414 1262 28 *124

ODetic Credit 1189 4*S rP 2?8S 1SU4 1979 T 303 417? 4726

Claim on pLbtlic etor 1097 U E5T SU 899 46S iiX Ti7- 2i9 2913Central and local govert nt (not) (730) (437) (471) (2463) (1598) (-612) (2805) (1140) (1867) (2026)

Publif authoritfe (net) (217) (-118) (-15?) (221) (442) (693) (-43) (130) (462) (187)Public swctor co¢eniet (150) (143) (-U) (066) (-257) (387) (652) (445) (632) (700)Claims n private sector 81 2 18o 140 429 1212 1819 863 917 1086

Cltram on other financialinstitutions t1 *32 26 31 186 299 431 461 298 72?

Other tet (net) '35 28 33 *307 *491 211 770 412 618 916

one aud uqasi-me 367 529 774 929 1097 2137 3702 3388 3048 2446Mony 208 232 362 433 474 659 1010 1333 987 876

tw 1I-Monsy 159 297 412 496 623 1478 2692 2055 2061 1570

Meow item:Foreign currey deposits ' * 202 174 452 1761 410 654 484

Greoth rate (2 per yr)ne nd 1qusi-mny 24 28 32 29 27 34 44 28 20 13

Freign curroncydepoits ' 49 2S 28 S5 11 1S 10

sources Central S.i* of Egypt, ItF nnd IB estimates

I/ Period is Juim 1980 to June 1981

Table 6.5: STRUCTURE OF INTEREST RATES(In per cent)

Effective from Jan.1 i ar.1 Jun.17 Jan.1 Apr.1 Jun.1 Jan.1 Aug.1 Jul.1 OeC.1

i9to 19?7 - - - 197i 8 71 19801 1982 198

Central Sankilrcoumt Rate 6.0 7.0 8.0 9.0 10.0 11.0 12.0 12.0 13.0 13.0

Comercial beksTime £ Savinp

deposit rate7 day 4.0 4.5 4.5 5.0 S.0 5.0 5.0

i5 day S.0 5.5 5.5 6.0 6.0 6.0 6.01 oneth 5.5 6.0 6.5 7.5 7.5 7.5 7.5

3 months 2.4 4.0 5.5 6.0 7.0 7.5 8.5 8.5 8.5 8.56 months 2.7 4.5 6.0 6.5 7.5 8.0 9.0 9.5 9.5 9.5

1 year 3.0 5.0 6.5 7.0 8.0 9.0 9.5 10.0 11.0 11.02 years 3.0 5.0 7.0 7.5 8.5 9.5 10.5 10.5 12.0 12.03 years 3.0 S.0 7.0 8.0 9.0 10.0 11.0 11.0 12.5 12.55 years 3.0 5.0 7.0 8.5 9.5 10.5 11.5 11.5 13.0 13.0sovtnga 2.4 5.0 5.0 6.0 7.0 8.0 8.5 8.5 10.0 10.0

Lending RatesMinim rate 7.0 8.0 9.0 10.0 11.0 12.0 13.0 13.0 13-15 /1Mxima rate 8.0 9.0 11.0 12.0 13.0 14.0 15.0 15.0 16 & up 2/

Cotton or exportrelated

Minima rate 6.8 7.8 8.5 9.5 10.0 11.0 11.0 11.0 - 3/ 11.0Maxim rate 6.8 6.8 8.5 9.5 11.0 12.0 13.0 13.0 13.0 13.0

Source: Centrat San* of Egypt

1/ Indistrfal sector 13 Muax. and Services sc¢tor 13-t152/ Co erciat sctor 16S mfn. with no maximu3/ No limit

- 111 -

Table 7.1: PRODUCTION OF MAJOR AGRICULTURAL CROPSCPRODUCTION IN THOUSAN4DS OF METRIC TONS: AREA PLANTED1N THOUSANDS OF FEDDANS: YIEL* IN METRIC TONS PER FEDDAN) 1/

AgricuL.ural YearEnded October 31 1973/74 1974/75 197s/76 1976M7 1977/78 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 1984/85

Winter cropsWheat

Production 1,884 2,033 1,960 1,697 1,933 1,856 1,796 1,938 2,017 1,996 1,815 1,872Area planted 1,370 1,394 1,396 1.207 1,381 1,391 1,326 1,400 1,374 1,320 1,178 1,186

Yield 1.30 1.46 1.40 1.41 1.40 1.33 1.35 1.39 1.47 1.51 1.54 1.58Morsebeans 2/

Production 234 234 254 270 231 236 213 208 260 295 271 302Area planted 244 246 260 292 239 2S0 24S 238 274 290 271 285

Yfold 0.96 0.95 0.98 0.92 0.97 0.95 0.87 0.87 0.95 1.02 1.00 1.10Onion 3/Production 359 229 240 263 223 157 331 328 296 224 160 189

Area plantad 39 26 31 37 29 23 39 39 36 26 19 22Yield 9.20 8.60 7.74 7.11 7.69 6.77 8.49 8.41 8.22 8.62 8.42 8.6?

Berseem (clover)Area planted 2,797 2,812 2,757 2,315 2,783 2,M 2,711 2,778 2,705 2,737 2,807 2,840

Surmer and autumn cropCotton

Production (tint) 490 441 382 396 399 484 529 499 490 400 399 438Area planted 1,600 1,453 1,346 1,248 1,423 1,195 1,245 1,178 1150 998 984 1,081

Yield 0.306 0.304 0.284 0.31r 0.294 0.405 0.425 0.424 0.426 0.401 0.406 0.405Rice (paddy)Production 2,242 2,423 2,300 2,2n 2,351 2,511 2,38 2,236 2,441 2,42 2,236 - 2,310

Area planted 1,053 1,053 1,078 1,040 1t031 1,040 9n 956 1,026 1,014 985,. 924Yield 2.13 2.30 2.13 2.19 2.28 2.41 2.45 2.34 2.38 2.41 2.27 2.50

maiZe (including Iili)Production 2,640 2,781 3,047 2,724 3,117 2,938 3,231 3,309 3,347 3,509 3,698 3,700

Area planted, 1,755 1,830 1,891 1,76S 1,8 1,88 1,906 1,924 1,935 1,952 1,975 1,914Yield 1.51 1.52 1.61 1.54 1.64 1.56 1.70 1.72 1.73 1.80 1.87 1.93

Millet (sorghum)Production 824 m 759 648 681 635 642 653 596 622 561 535

Area planted 499 489 475 409 434 407 410 413 383 393 365 331Yield 1.65 1.58 1.60 1.59 1.57 1.56 1.57 1.58 1.56 1.58 1.5S4 1.61

SugarcaneProduction 7,018 7,902 8,446 8,379 8,296 8,791 8,618 8,805 8,748 8,424 8,396

Area planted 208 218 242 2.9 248 249 252 2S1 2S4 250 249Yield 33.70 36.20 34.90 33.60 33.45 35.35 34.20 35.09 34.42 33.70 33.70

GrounditsProduction 25 28 28 30 26 27 26 26 24 20 21 23

Area planted 29 32 32 36 31 31 28 28 29 27 24 28Yield 0.87 0.87 0.88 0.83 0.83 0.87 0.90 0.90 0.82 0.75 0.89 0.82

Fruits and vegetablesCitrus fruitsProduction 963 1,013 889 797 990 1,216 1,067 1,033 1490 1,297 1,407 1,399

Area planted 1S5 162 178 183 188 190 198 198 210 214 228 234Dates

Production 396 415 417 41 377 406 446 391 440 470 474 S09Ara aplsnted 34 ... 35 ... 33 33 34 34 33 33 35Other fruits

Production 612 640 705 644 717 751 768 850 932 990 1022 1042Area planted 118 123 135 138 144 150 163 170 180 190 206 222

PotatoesProductfon 709 720 893 1,010 m 1,019 1,214 1,195 1,184 1,095 1,189 1,478

Area planted 95 98 128 152 128 142 167 159 153 138 148 17Yield 7.50 7.30 7.00 6.60 6.00 7.20 7.26 7.S2 7.74 7.93 a.03 8.34

Other vegetablesProduction S,297 5,800 6,029 5,791 6,357 6,755 6,747 6,829 6,981 7,218 7,303 8,329

Area planted 725 797 801 778 822 873 878 868 82 883 871 922

Source: Mnistry of Agriculture

1/ Production may not always equal the product of area planted andyield because of roumding.

2/ Excludes crops condmd green (as vegetables and forage).3/ Winter (export) cro only.

- 112 -

Table 7.2: COTTON PRODUCTION(PRODUCTION IN THOUSANDS OF METRIC TONS OF LINT, AREA PLAITED INTHOUSANDS OF FEDDANS; YIELDS IN KILOGRAIS OF LINT PER FEDDAN) 1/

1974/73 2/ 1975/76 1976/77 1977/78 1978/79

Type of Cotton Area Area Area Area AreaProd.Planted Yietd Prod. Planted Yield Prod. Planted Yield Prod. Planted Yield Prod. Planted Yield

Extra Long Staple 160 583 276 142 564 253 152 516 295 143 519 277 168 437 384

Giza 4S I1 T gE 2T -8 -T9 16 7 26 7 i -7 - 20Mencufi 62 235 263 48 206 233 30 117 258Oizx 68 37 123 299 30 107 278 30 118 258 39 156 249 1S 45 333Giza 70 51 175 292 56 212 266 85 256 332 97 334 291 146 366 399Gi2a 76 .Giza 77 *

Long Staple 160 474 338 131 420 312 145 411 353 192 588 327 290 705 411

Giza 69 0 16-1 311 3T9 11-4 3U 7- -fi W76 Ma 156 T333 T 2_2 451Giza 67 73 203 360 59 201 291 71 208 341 62 241 257 69 175 394Dondara 37 110 336 32 103 312 34 98 347 43 145 296 70 195 359Giza rs 315 1 2 435 3 7 412 15 46 326 95 211 450Giza 82 * * * 1 2 500Giz280 a

American *

Mediuu Staple 110 396 277 98 362 272 89 321 277 53 316 168 17 54 315

Giz 66 53 215 247 43 TWO M 53 200 264 2 26i3 161 17 54T 35Ashmoewi 30 88 336 26 79 328 36 121 297 8 37 216Giza 72 27 93 291 29 103 287 - - 3 16 188Others * . . . . . . . .

Subtotal 430 1453 296 371 1346 276 386 1248 309 388 1423 273 475 1196 397

Scarto 3/ 10 * * 11 10 11 9

Total 441 1453 304 382 1346 284 396 1248 317 399 1423 294 484 1196 405

- 113 -

Table 7.2: COTTON PRODUCTION (cOuxr'D)(PR.ODUCTIOI1 IN THOUSANDS OF METRIC TONS OF LINT, AREA PLANTED INTHOUSANDS OF FEDDANS; YIELDS IN KILOGPAMS OF LINT PER FEDDAN) 1/

1979/80 1980/81 1981/82 198213 1983/84 1984"/85

Type of Cotton - Aree Area Area Aree Arese -

Prod. Plsnted Yield Prod. Plented Yield Prod. Planted Yield Prod. Pltnted Yield Prod. Ptnted Yield Prod. Planted Yield

Extra Long Staple 158 378 418 118 291 405 112 269 416 107 289 370 111 286 39 92 252 365

Giza 45 -8 27 i -7 197 6 1 52 f 4 1 308 -3 14 214 4 14 2a611noufi * * *01*5 68 13 37 351ais 70 134 307 436 98 239 410 91 223 408 77 214 360 52 151 34 38 101 376Gila 76 1 4 250 2 3 439 2 3 667 1 3 333 3 7 429 S 15 333Giza?77 2 3 667 11 24 464 13 26 S00 25 59 424 53 114 465 45 122 167

tong Staple 347 793 438 372 887 419 370 880 420 287 710 404 281 698 403 341 829 411

Gila 10 4 102 497 j43 tO1 4 2 69 1Z9 4 * 9Giza 67 33 89 371 30 83 359 30 83 361Oandare 72 176 409 67 169 396 62 157 395 48 127 378 36 120 300 57 145 393Giza 75 182 391 465 233 530 441 232 530 438 198 479 413 203 454 447 233 571 408Giza 82 2 8 250Gia 80 I 1 400 3 8 37 9 23 391 20 3 274 24 54 444

Amarican 1 2 338 0.1 0.5 200 1 2 500Giza 81 - 3 7 429 8 11 727

edium Stapte 25 73 342 0 0 0 0.4 0.9 444 0 0 0 0 0 0 0.2 0.3 667

Giza66 25 73 3427

Others - 0.4 0.9 444 0.1 0.2 500 0.1 0.2 500 0.2 0.3 667

Subtotal 530 1244 426 490 1178 416 482 1150 419 394 999 394 392 984 398 433 1081 401

Scarto 3/ - 9 8 - 6 5 5

Total 530 1244 426 499 1178 424 490 1150 426 400 999 400 397 984 403 438 1081 405

SourceZ Ministry of Agriculture

1/ Cconents NWy not add to totals duj to rounding; yield conputedfrom unrounded data on production nd area planted.

2/ Agriculturet Year sod October 31.3/ Lint recovered from mill floors after ginning; used for psdding,etc.

From 1980/81 orwttids.dats for scarto is not given separatety.

- 114 -

Tpble 7.3: M4EAT AtJD POULTPY PRODUCTION(IN THOUSANDS OF METRIC TONS)

197w t975 1976 1977 1978 1979 1960 1981 1982 1983 1984

Neat 302 305 307 315 321 330 336 339 348 355 364

Cattle 120 121 121 123 125 12? 131 132 133 135 137

euffalo 126 12? 130 131 134 139 140 143 146 149 153

Sheep 33 34 32 3? 38 39 40 42 43 45 47

Goats 17 1? 17 17 17 18 18 18 19 19 20

swine I 1 2 2 2 2 2 2 2 2 2

Camels 5 5 5 5 5 5 5 2 5 5 5

Poultry 110 113 115 121 115 119 136 140 144 150 157

Total 412 418 422 436 436 449 472 479 492 50S 521

Source: Ministry of Agriculture

Table 7.4: TOTAI, COSTS OF PRODUCTION BY CROPS 1/

(LE/Fecdan)

Agricultural YearEnded October 31 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 1984/85

Production

Wheat 59.33 65.23 75.80 88.45 108.34 141.62 152.70 176.19 229.18 264.57 292.51Norsebeans 50.80 57.59 64.58 73.31 90.88 118.02 148.75 180.67 208.30 228.06 251.53

Onions (winter) 143.52 176.18 187.03 195.45 246.04 280.69 337.42 352.84 469.36 506.40 501.58Lentils 50.57 60.18 69.50 75.66 107.55 132.06 143.89 184.87 202.30 259.C0 277.00

Tomatoes (winter) 84.45 104.14 123.96 161.11 191.04 237.12 287.96 409.72 439.00 487.00 576.00Berseem (teeporary) 15.09 13.73 17.23 33.00 24.57 29.09 33.40 39.63 46.40 89.00Berseem (permanent) 45.87 45.66 55.16 74.02 84.77 99.56 110.13 131.93 119.00 155.00 153.00

Barley 43.00 48.02 61.06 67.05 79.13 94.75 116.55 146.83 189.23 217.00 241.00

Cotton (seed) 100.77 122.80 133.68 150.39 186.96 238.58 301.53 383.72 435.93 471.57 499.85Rice (summer) Broadcosted 67.38 83.40 85.51 96.17 120.84 155.42 179.22 218.46 264.00 324.00 345.28Rice (summer)Transplanted 70.33 86.39 92.05 102.38 131.96 163.26 197.76 240.82 267.53

Maize (sumer) 59.57 70.97 85.00 102.9? 119.21 139.65 174.19 209.66 255.20 280.28Millet (sorghum) 55.56 68.61 74.41 90.91 103.07 156.55 182.40 206.21 246.06 264.06

Sugarcane 127.17 166.62 186.88 199.44 237.59 388.92 432.75 504.60 625.21 668.81crouninuts 63.39 85.72 95.66 107.78 128.43 144.27 182.20 219.61 261.11 303.00

Potatoes (summer) 155.37 208.01 287.32 294.91 325.42 444.38 469.56 596.87 620.00 717.00 788.00Soybeans ... ... ... 124.80 162.33 187.70 215.70 247.65 278.32 292.00Sesame 43.07 52.40 61.78 72.86 96.97 117.05 161.47 175.40 193.70 231.00

Potatoes (Mill) 155.58 197.63 224.67 251.33 3i0.57 357.32 409.27 432.75 499.00 596.00

Source: Ministry of Agriculture

1/ Exeludes crops consumed green (as vegetables and forage).

- 115 -

Table 7.5: INDICES OF AGRICULTURAL PRODUCTION AND YIELD(1974/75 - 100)

Agricultural YearEnded October 31 1973/74 1974/73 197sn76 197677 19sI/78 197sr?9 1979/80 1980/81 1981/82 1982/83 1983/84 1984/5

Product1on

Wheat 92.67 100.00 96.41 83.47 95.08 91.29 88.34 95.33 99.21 98.18 89.28 92.08Norsebe 1/ 100.00 100.00 108.55 115.38 98.n 100.85 91.03 88.89 111.11 126.07 113.81 129.06

oneo 2/ 156.77 100.00 106.80 114.85 97.38 68.56 164.5 143.23 129.26 97.82 69.87 d2.53Cotton (lint) 111.11 100.00 86.62 89.80 90.48 109.75 119.95 113.15 111.11 90.70 90.48 99.32Rice (paddy) 9253 100.00 96.92 93.77 97.03 103.63 98.39 92.28 1oo.74 1o.78 92.28 95.34

Maite (including Mill) 96.93 100.00 109.56 97.95 112M08 105.65 116.18 118.99 120U35 126.18 132.9s 133.05Mitloet (sorght.) 106.32 100.00 97.96 83.61 87.87 81.96 82.86 86.26 76.90 80.26 72.39 69.03

Sutecane 88.81 100.00 106.88 106.04 106.99 111.25 109.06 111.43 110.1 106.61 106.25Oardmmdts 89.29 100.00 100.00 107.16 92.86 96.63 92.86 92.86 85.71 71.63 75.00 82.14

Cftrue Fruits 95906 100.00 87.76 78.68 97.73 120.06 105.33 10t.97 147.09 128.06 13.9 138.10Oates 95.62 100.00 100.48 111.08 90.83 97.83 107.67 96.22 106.02 113.25 114.22 122.65

Other Fruits 95.63 100.00 110.16 100.63 112.03 117.34 120.00 132.81 165.63 154.09 159.69 162.8potatoes 98.67 100.00 126.03 160.28 107.22 141.53 168.61 165.97 16.64 152.18 165.16 203.28

Other Vegetabtes 91.33 100.00 103.95 99.86 109.60 116.64 116.33 117,74 120.36 124.S 125.91 143.60

Yield

Wheat 89.06 100.00 95.89 96.8 # .89 91.10 92. 7 95.21 100.68 103.42 105.8 108.22lorsebeas 101.05 100.00 103.16 96.84 102.11 100.00 91.58 91.58 100.00 107.37 105.26 115.79

OnI ins, 106.98 100.00 90.00 82.67 89.42 78.72 98.72 97.79 95.58 100.23 97.91 100.81Cotton 100.66 100.00 93.62 106.28 96.7 133.22 139.80 139.47 140.13 131.91 133.55 133.22

Rice (pacidy) 92.61 100.00 92.61 9.22 99.13 106.78 106.52 101.4 103.48 106.78 98.70 108.70maize (including Miti) 99.34 100.00 105.92 101.32 107.89 102.63 111.86 113.16 113.82 118.42 123.03 126.97

Millet (sorghum) 104.43 100.00 101.27 100.63 9.37 98.73 99.37 100.00 . .73 100.00 97.47 101.90Sugarcane 93.09 100.00 96.61 92.82 92.40 9s765 94.48 96.93 ss.08 93.09 93.09

croardiuts 100.00 100.00 101.1s 95.40 95.60 100.00 103.65 103.45 94.25 86.21 102.30 94.25Potatoes 102.76 100.00 9.89 90.41 82.19 98.63 9945 103.01 106.03 108.63 110.00 114.25

Sourcet Minist"r of %griculture

1/ Exclude crops conmed green (as vgetebies and forage).2/ winter (export) crop only.

Table 7.6: ANNOUNCED COOPERATIVE PURCHASE PRICES FORSELECTED AGRICULTURAL CROPS 1/(In Egyptian Pounds per metric ton)

Agricultural YearEnded October 31 19n/71976/75 19756 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 1984/8S

Seed cotton (ungined) 2/ 150.00 161.00 206.00 219.00 219.00 289.00 299.94 36S.83 380.70 613.52 529.33 s84.95

Whet 3/ 46.7o 46.7n- 6.70- "6.ro- 46.70- 63.00- 76.70- 76.70- T6.70- 80.0L- 120.00 165.0053.30 53.30 53.30 S3.30 53.30 70.0o 83.30 83.30 83.30 100.00

Rice 32.00 40.00 50.00 50.00 65.00 63.00 75.00 85.00 95.00 105.00 6 105.00 125.00

SuWrcs 6.00 7.00 8.00 8.00 9.00 12.50 15.50 16.00 18.20 18.20 20.20 24.20

Norsebean 58.10 83.90 83.90 96.80 96.80 129.00 161.30 225.80 238.71 238.71 258.06 277.00

Winter onion 22.00 27.00 33.00 33.00 38.00 63.00 6.o00 52.00 72.00 75.00 75.00 80.00

roundnut 93.30 160.00 160.00 186.70 240.00 240.00- 260.00- 333.33 333.33 333.33 426.67266.70 266.70

sessm 158.30 183.30 208.30 208.30 208.30 416.70 s41.70 625.00 625.00 708.33 833.33 1000.00

Lentfls NA 106.30 137.50 156.25 1S6.25 218.75 250.00 375.00 375.00 375.00 562.50 719.00

Source: Ministry of Agriculture.

1/ Cove the major crops earketed cooperatively (or under contractswith mills) in whole or in parts priceo are for first-gradaqi5lity.

2/ Averae paid price.3/ Pricfe are for OfCa 155 snd xican varietles respectively.4/ for Philippine varety, the soffficial cooperative wmueed

price is LE 115.05/mtrio ton in 1983 in order to encourew thefarmrs to introduce thio high yield variety in their holdins.

-J

- 116 -

Table 8.1; OUTPUT OF SELECTED INDUSTRIAL PRODUCTS(.ID thousands of metric tons unless otherwise stated)

1974 1975 1976 197 1978 1979 1980/81 1981/82 1982/83 1983/84

Spirsing and weavingCotton yarn 179 181 193 210 212 218 239 245 229 239Cotton textiles (million

sqare moters) 759 7m2 873 905 918 950 980 1005 974 986

FoodstuffsSugar 577 526 576 614 629 632 619 59 697 644Cheese 135 153 147 149 161 160 183 187 188 191Preserved fruits and

vegetables 18 24 48 41 40 51 60 60 69 73Cottonseed oil 170 161 160 166 169 168 202 202 222 238oilseed cakes 540 720 417 30 431 433 540 548 538 506Soft drinks (millionbottles) 660 784 960 984 1,389 1,424 2,222 2,003 3,522 2,986Beer (million liters) 29 29 30 39 42 36 46 51 32 36Cigarettes (billions) 23 21 28 25 27 30 33 36 36 45

ChemicalsSulfurie acid 30 36 28 27 30 31 21 21 27 55Superphosphates 465 520 493 513 502 483 474 512 588 847Amnoniup nitrate 320 400 500 1/ 622 1/ 698 1/ 851 I/ 3,345 1/ 4,121 4,133. 4,124Tires (thousands) 814 923 859 903 85? 933 1,106 1,218 1,316 1,461

Engineering productsCars (units) 8,169 11,576 9,799 12,817 14,562 15,670 18,734 17,035 25,057 20,290Trucks and tractors (units) 2,342 2,825 3,807 4,445 4,101 5,087 4,899 6,429 6,967 8,228Buses (units) 360 305 307 475 465 552 622 705 788 759Refrigerators (thousands) 55 109 112 129 138 190 259 424 455 497Televisions (thousands) 68 ?? 88 138 166 228 406 557 759 843

MetalLurgical productsReinforcing bors 232 219 202 230 249 302 281 275 281 286Steel sections 81 106 151 128 157 177 179 209 209 212Steel sheots 125 211 156 235 229 264 380 313 314 277

Cast iron 55 66 63 78 109 112 24 61 196 159Aluainum ... 54 90 101 102 134 140 140 170

mining productsPhosphate 499 428 392 468 483 527 521 499 64S 725

Source: Ministry of Industry

1/ At 15.5 per cent nitrogen equivalent.

- 117 -

Table 8.2: PRODUCTION AND DISTRIBUTION OF INDUSTRIAL GOODS 1/(In millions of Egyptian Pounds)

1974 1973 1976 2/ 1977 1978 1979 1980/81 1981/82 1982/83 1983/84

Public sector production 1429.3 1671.1 1724.1 1963.3 2391.9 2796.0 3990.0 4438.7 5079.0 5650.2

Spinning and weaving products 458.3 503.9 563.1 6-15.2 798.3 838.7 T1162. 1262.2 1317.0 1411.0Foodstuf f 483.0 550.4 591.7 656.6 75S.9 894.7 1230.6 1367.9 1664.2 1870.8Chemicals 157.7 212.1 180.4 222.0 235.0 297.1 513.0 548.7 600.4 681.2

Engineering and mtal-lurgical products 271.0 327.9 381.2 458.2 569.1 723.1 1030.5 1194.5 1423.0 1598.0Building materials 59.3 76.87Mining products 3/ 7.7 11.3 33.6 42.4 53.8 65.4 74.4 89.2

Private sector production 475.0 596.8 735.5 775.8 1040.3 1361.6 1847.4 2157.9 2244.7 2926.8

Totat 1904.3 2267.9 2459.6 2739.1 3432.2 4157.6 5837.4 6S96.6 7323.7 8577.0

Public sector exports 168.4 171.8 162.8 187.0 269.6 396.7 436.2 428.9 423.5 578.2

Spinning and weaving products 104.5 96.2 To. 106.0 150.2 202.0 215.4 202.3 178.9 25t.8Foodstuffs 31.3 38.1 22.0 14.4 37.1 37.5 32.1chemicals 6.2 5.7 3.0 1.4 3.7 7.1 - 38.5

Engineering and retac-lurgicat products 22.9 29.1 37.9 59.1 75.0 146.3 117.1

suilding materfals 3.5 2.7 * 126.3Mining products 3/ 3.0 6.1 3.6 3.8 6.4

Private sector exports 54.3 59.0 44.3 52.5 44.1 61.9 63.1 55.9 50.1 69.2

Total 222.7 230.8 207.1 239.5 313.7 458.6 499.3 484.8 473.6 647.4

Pubtic sector domestic sales 4/ 1140.5 1401.7 1421.0 1621.6 1882.7 2366.5 3348.0 3831.0 4434.0 4878.0

Spinning and weaving products 274.0 316.1 361.0 388.1 442.9 539.7 731.0 809.0 885.0 948.0Foodstuffs 438.5 500.6 551.0 617.3 699.4 828.5 1142.0 1291.0 1541.0 1747.0Chemicals 147.6 222.2 174.0 221.1 229.3 294.7 461.0 536.0 588.0 638.0

Engineering and metal-lurgical products 221.7 285.2 331.0 389.4 480.1 663.7 964.0 1136.0 798.0 851.0Building materials 58.7 77.6 * - - - 555.0 610.0Mining products 3/ * - 4.0 5.7 31.0 39.9 50.0 59.0 67.0 84.0

Source: MInistry of Industry

1/ Covers only industries under the supervision of the Ninistryof Industry and Mining. Does not cover national defense production,cotton ginning, flour milling, bakery production, tee packing,pharmaceutical production, iron ore mining, or production ofvillage industries. Since 1976 cement,wine,spirits, and paperproduction also excluded.

2/ With offect from the beinning of 1976, the wine and spiritsindustry was placed under the supervision of the Ministry ofAgriculture, the paper industry uwder the supervision of theNinistry of Informstion, and the cement industry under thesupervision of the Ministry of Housing. Therefore, data on theoutput of the foodstuffs, chemicals and building materials sectors(in which these industries had been included) after 1976 are notcomparablo with ths earlier figures

3/ Mining products, shown separately since 1976, were earlier includedin the foodstuffs (salt), chemicals (phosphate) and buildingmaterials Clime) subsectors.

4/ Data on domestic sales of private sector are not available.

- 118 -

Table 8.3: INDEX OF INDUSTRIAL PRODUCTION(1975 100)

1974 1975 1976 19?7 1978 19?9 1980/81 1981/82 1982/83 1983/84

Spirming and weavingCotton yarn 98.9 100.0 106.6 116.0 117.1 120.4 132.0 135.4 126.5 132.0

Cotton textiles 98.3 100.0 113.1 117.2 118.9 123.1 126.9 130.2 126.2 127.7

FoodstuffsSugar 109.7 100.0 109.5 116.7 119.6 120.2 117.7 113.9 132.5 122.4

Chees 88.2 100.0 96.1 97.4 105.2 104.6 119.6 122.2 122.9 124.8Preserved fruits and

vegetables 75.0 100.0 200.0 170.8 166.7 212.5 250.0 250.0 287.5 304.2Cottonseed oit 105.6 100.0 99.4 103.1 105.0 104.3 125.5 125.5 137.9 147.8oitseed cakes 75.0 100.0 57.9 59.7 59.9 60.1 75.0 76.1 74.7 70.3

Soft drinks 84.2 100.0 122.4 125.5 177.2 181.6 283.4 2555 449.2 380.9Beer 100.0 100.0 103.4 134.5 144.8 124.1 158.6 175.9 110.3 124.1

Cigarettes 109.5 100.0 133.3 119.0 128.6 142.9 157.1 171.4 171.4 214.3

ChmeicalsSulfuric acid 83.3 100.0 77.8 75.0 83.3 86.1 58.3 58.3 75.0 152.8

Superphosphates 89.4 100.0 94.8 98.7 96.5 92.9 91.2 98.5 113.1 162.9A4nniu nitrate 80.0 100.0 125.0 1/ 155.5 I/ 174.5 1/ 212.8 1/ 836.3 1/ 1030.3 1033.3 1031.0

Tires 88.2 100.0 93.1 97.8 92.8 101.1 119.8 132.0 142.6 158.3

Engineering productsCars 70.6 100.0 84.6 110.7 125.8 135.4 161.8 147.2 216.5 175.3

Trucks and tractors 82.9 100.0 134.8 157.3 145.2 180.1 173.4 227.6 246.6 291.3Buses 118.0 100.0 100.7 155.7 152.5 181.0 203.9 231.1 258.4 248.9

Refrigerators 50.5 100.0 102.8 118.3 126.6 174.3 237.6 389.0 417.4 456.0Televisionq 88.3 100.0 114.3 179.2 215.6 296.1 527.3 723.4 985.7 1094.8

Metallurgical productsReinforcing bars 105.9 100.0 92.2 105.0 113.7 137.9 128.3 125.6 128.3 130.6

Steel sections 76.4 100.0 142.5 120.8 148.1 167.0 168.9 197.2 197.2 200.0Steal sheets 59.2 100.0 73.9 111.4 108.5 125.1 180.1 148.3 148.8 131.3

Cast iron 83.3 100.0 95.5 118.2 165.2 169.7 36.4 92.4 297.0 240.9

Mining productsPhosphate 116.6 100.0 91.6 109.3 112.9 123.1 121.7 116.6 150.7 169.4

Source: Hinistry of Industry

1/ At 15.5 per cent nitrogen equivalent.

- 119 -

Tabae 9.1- PRODUCTION AND DISTRIBUTION OF CRUDE PETROLEUM(In millions of metric tons)

1974 1975 1976 1977 1978 1979 1980/81 1981/82 1982/83 1983/84 1984/85

By location: 7.5 11.7 16.6 20.9 24.4 26.5 31.0 32.5 34.5 39.1 43.7

El Norgan, Juty and Ramadan 7.8 10.0 14.3 17.4 W. W.6 23.4 H-.i 3 31.9Other Red Sea & Eastern Desert 1.6 1.9 1.5 1.4 1.2 1.3 1.5 1.6 1.7 2.4 2.7

Western Desert 1.6 1.7 1.6 1.5 1.4 1.5 1.0 1.0 0.8 0.8 0.9Sinai 0.3 3.5 3.7 4.4 5.1 S.9 6.5 6.9 7.6 8.2

8y Share:

Cost recovery exports N.A. N.A. 2.2 3.1 4.3 S.0 6.2 6.6 7.1 8.2 9.9

to cover actual costs N.A. N.A. 1.1 1.6 2.7 Yi 1.8 2.3 3.0 3.9 5.6returned to EGPC N.A. N.A. 1.1 1.5 1.6 2.6 4.4 4.2 4.1 4.3 4.3

Profit oil N.A. N.A. 13.0 16.5 18.9 20.2 23.8 24.9 26.3 29.6 32.2

Egyptian share N.A. N.A. 11.3 1W.8 16.2 T7-o 20 21.2 T2-4 B55i 27.2Partners' share N.A. N.A. 1.7 1.7 2.7 3.2 3.6 3.7 3.9 4.S 5.0

GPC production 1/ N.A. N.A. 1.4 1.3 1.2 1.3 1.1 1.1 1.1 1.3 1.6

Total Egyptian share 2/ 5.1 8.8 13.8 17.6 19.0 20.9 25.6 26.5 27.6 3. 7 33.1

(plus purchases of crude oil) 3.9 3.6 Mi 0.5 0.2 0.2 0.0 0.6 0.2 0.4 0.2used for refining 3/ 6.9 8.6 10.5 11.1 11.1 12.3 14.3 15.5 17.2 18.3 20.4

change in stocks 0.7 1.4 0.0 1.0 0.2 0.2 0.8 0.6 -0.3 0.1 1.1exports 1.4 2.4 S.6 6.0 7.9 8.6 10.5 11.6 10.7 12.3 11.6

Partners' share 2.4 2.9 2.8 3.3 5.4 5.6 5.4 6.0 6.9 8.4 10.6

exports 1.0 1.7 2I i27 M: 11.4 74 5.4 I6.7 W5 10.4sales to Egypt 1.4 1.2 0.7 0.5 9.2 0.2 0.0 0.6 0.2 0.4 0.2

Discrepancy 0.6 0.2 0.4 0.2

Nemo Iteam

Domestic Consumption 4/ 6.0 6.8 8.0 8.6 9.3 10.4 11.9 13.4 15.3 16.8 17.9

Source: Egyptian General Petroleum Corporation

1/ EGPC subsidiary2/ Includes excess cost recovery3/ Exeludes crude imported for refining4/ Includes butane but exclude natural gas

- 120 -

-Table 9.2: NATURAL GAS RESERVES AND PRODUCTION(In thousand metric tons) 1/

RecoverableReserves Production

metricArea ton 10 1978 1979 1980/81 1981/82 1962/83 1983/84 1964/85

Abu Nadi 50.8 142.0 166.0 625.0 651.0 715.0 795.0 938.0

Abu aharadlg 13.6 441.0 476.0 790.0 825.0 790.0 798.0 907.0

Abu Qir 26.2 221.0 395.0 448.0 649.0 767.0 798.0

Abu air North 2/ 15.8

AMl ' '

Sinai

Gulf of Suez 27.2 * 40.0 369.0 536.0

Total 133.6 583.0 863.0 1810.0 1924.0 2194.0 2729.0 3179.0

memo Item:Consumption 583.0 863.0 1810.0 1931.0 2194.0 2659.0 3139.0

Source: Egyptian General Petroleum Corporation

1/ One metric ton of natural gas is approximateLy equal to 46,200cubic feet, or 1.2 metric tons of fuel oil equivatent

2/ Under appraisal

- 121 -

Table 9.3: ?ETROLEUM PRODUCTS AND GAS BALANCES 1/(In thousands of metric tons)

1974 t97 176 19m 1978 1979 198l/1 1981/82 19U 19g/"1 198

PrWoxtfon 60 49 60 66 74 141 224 243 270 Si9 4rconwtIo n i.4. 3.A. 211 A24 298 338 363 4 499 550 59SNot eports N.A. N.A. 15 4188 203 -216 -148 .207 -223 *16 -145

(0) (a) t0) (0) (0) (0) (a) (0)Change i, inventories N.A. N.A. N.4. 6 t19 19 24 14 .6 .5 .4

aeaso rin and naphtheProduction '225 1335 1492 * m 1909 2e 29 23re rs

Consuition N.A. 3.A. m 851 981 1078 18 1417 1s86 1746 1928met *xorts 2/ N.4. N.A. 75r 3/ 63 751 486 712 Y2 "1 S41 "I

(712) (728) (44 (541) ("66)Change in inventories N.A. N.A. N.A. 65 51 7 *s .54 67 61 46

KerosentProdution 1245 1203 1311 1384 146 1454 1475 11 15 2029 2123

Consw1ption N1.a. N.a. 1328 1305 1389 144 1556 1706 1901 2043 2189Net exports N.A. *.A. -1? 19

(42)Change in injentories N.A. 3.A. N.A. 60 75 -16 -135 S2 *14 ST

Jet fuelProduction 90 91 125 123 178 181 154 167 167 159 129

ConsunptIon N.A. N.A. 60 101 182 249 255 335 327 399 413Wet exports N.A. 3.a. 65 34 .46 .75 2e -29 -7t -2 t 330

(118) (143) (13n (18) (165) (160) (163) (1n2) (1AM)Change in inventories N.A. l.A. N.4. 12 44 7 165 12* 17 41 46

ra oit -d diesel fuetProd,ction 1350 1607 1697 1961 282 2312 2e2t 263 2794 2851 33

Consuyption N.a. N.A. 1493 1e30 1461 2183 280 3203 3464 3897 4257met exports 4r l.A. N.A. 20 27 a7 161 *196 -S84 -8n .1053 -1021

(285) (201) (283) (349) (317) (2) (245)Change In inventories 3.4. N.a. N.A. 54 46 28 -13 15 203 7 tot

Fuel oitProduction 2800 4165 S060 525S4 544 552 6767 7743 8699 9057 978?

Con9tion N.A. N.A. 406 492 4436 4971 5424 59 7016 759 7916met exports N.A. 3.A. 994 909 9t4 02 1234 1928 1654 1574 2012

(1048) (752) (1234) (1928) (1654) (1574) (1230)Chane in inventorie N.A. N.A. 3.A. 53 46 .146 109 155 28 -86 141

AsphaltProduction 65 118 131 142 192 202 92° 304 476 531 581

Consaption 65 118 131 138 161 202 270 257 451 525 56MWet e"parts 16 14 .A.

(16) (14)Chaoe in inventorfSe 3.A. N.A. N.A. 4 31 22 31 4 6 14

Aviation fuelProduction

Cons.*9tion 3 6 8 7 6 5 3 3wet exports 53 .6 -8 t7 .6 .3 .3 5

(0) (0) (0) (0) (0) (0) (0) (0)Change in inventories

Totat Petroloun ProduCtsProduction 6835 S568 9876 10459 11267 1158 13522 14753 16654 17376 19031

Consurption 59S3 6813 S2 an 9312 1041S 11995 1335t t5255 16754 1700Net Exports 853 1702 1652 1661 1761 1250 1309 1579 1033 612 N.A.

Chne in inventories N.A. N.A. N.A. 230 194 .77 283 184 36S 10 3.A.

laturM geeProduction N.A. N.A. 104 353 583 063 1810 1924 2194 2729 3179

Conn09t ion 104 353 503 863 1810 1931 2194 2659 3139Met exports v l

Chrnge in inventorie s0

Totat Pottoleft Prod6icte *- extural Gae

I zc t Ion 6835 8515 9900 10812 11850 12451 15332 1477 1888 20105 22e1'V ilptin 5983 6813 3128 8921 9895 11278 13805 15289 17449 9415 2W91

4ct LA;.-vts 852 t702 8a52 1461 1761 120 1309 S79 1033 1id W A.Change , or.dr:;ries N.A. N.A. 3.4. 230 194 7t 283 .184 365 i0 N.A.

es0 tEyptian Geneal Petroteus Corporation

V/ CWWA*tion derived as a rSsiduat and h Intinu stock

2/ HAM aailoble ad difftrent from not expbts. deat for exports tohon in pwwhee

3/ Ths emperted product is neptha4/ Exerts e tlgety bia*er sales

- 122 -

Table 9.4; EXPOP.TS ADD IMPORTS OF CRUDE PETROLEUII AND PRODUCTS(Volume in millions of barrels; value in millions of US dollars)

1976 1977 1978 1979 1980/81 1981/82 1982/83 1983/84 1984/85

ExportsCrude o0t 1/

Volumo 40.8 43.3 50.0 60.6 75.6 83.5 77.5 87.9 83.7Value 404.2 482.2 657.1 470.0 2559.7 2600.4 2182.4 2396.0 2263.5

PetroleuA productsVolume 15.8 14.1 16.1 12.6 17.3 23.0 20.1 18.5 22.4Value 217.5 213.3 258.1 408.4 619.6 728.8 624.9 561.2 627.5

ImportsPetroleum products

Voltum 1.4 0.8 2.0 2.1 6.6 10.0 11.0 12.8 12.8Value 21.2 14.7 41.1 85.3 295.4 432.2 407.8 457.8 424.2

Source: Egyptian General Petroleun Corporation

1/ Includes cost recovery

- 123 -

Table. 9.5a: STRUCTURE OF PETROLEUM DOMESTIC PRICES, 1982/83(In millions of Egyptian Pounds)

Final Transpor- Road Const-Sale Consuq-p tation Marketing Refining ruction and MetPrice tion Tax Coats Costs Costs Maintenance Back

Butann 52.0 15.0 38.0 39.6 -40.6Gasoline premiun 210.0 141.4 3.4 6.6 32.4 23.8 2.4Gasoline - regular 154.0 110.6 3.4 6.5 28.4 7.0 *1.9

Kerosene 37.8 12.6 3.0 3.9 30.5 -12.2Gas Olt 36.0 12.0 2.9 2.4 29.8 11.1

Diesel fuel 30.4 9.4 3.5 2.3 38.2 -23.0Fuel oil 7.5 0.5 1.5 1.3 15.5 *11.3

Source: Egyptin General Petrolum Corporation

Table 9.5b: STRUCTURE OF PETROLEUI DO0!ESTIC PRICES, 1983/84(In millions of Egyptian Pounds)

Final Transpor- Road Const-Sale Consuip- tation marketing Rofining ructfon and NetPrice tion Tax Costs Costs Costs Maintenance Back

Butane 52.0 15.0 38.0 32.2 -33.2Gasoline premium 210.0 141.4 5.8 6.6 31.2 23.8 1.2Gasoline regular 154.0 110.6 5.8 6.5 38.3 7.0 -14.2

Keros ene 37.8 12.6 5.2 3.9 23.6 -7.5Gas oil 36.0 12.0 S.0 2.4 28.7 - -12.1

Diesel fuel 30.4 9.4 9.2 2.3 17.5 -8.0Fuel oil 7.5 0.5 2.9 1.3 12.3 - 9.5

Source: Egyptian General Petroleum Corporation

- 124 -

Table 9.6: PETROLEUM EXPORT PRICES(In US dollars per barrel)uss It" llghted

EffttvSw 0"to/ $si Sle yla harib bleyli A" go of left Uherib Avers"Period Avras Sted l/ Ste 1 Slted Nerth Buren Oihtr Bay Nslw Price 2/

1981from jwwry 1 40.50 37.00 32.00 368.15

fre April 1 37.50 35.50 31.50 6.10Fres may 1 36.00 33.00 30.00 34.23

Ores jre 1 33.00 30.00 27.00 31.20Fres July 1 3S.00 30.00 27.00 31.11

From eovw8er 1 34.00 31.00 29.00 32.28

1982fror mary 1 34.00 31.00 28.00 32.12

Fres Farmary 1 33.00 29.00 26.70 30.-6From VArch 1 32.00 28.00 26.00 2948

from Jim 1 32.60 28.50 26.50 30.23fres #va_r 1 32.60 29.00 26.75 29.45Ors D0embr 1 31.75 29.00 26.25 29.00

1963Freo Jwunsry 1 31.00 28.00 26.00

from Februry 1 29.00 27.00 25.00Iras Nerch 1 27.00 25.25 23.00

Fran Nay 1 27.50 25.75 23.25From mwa 1 27.75 26.00 23.25frt Juty 1 28.25 26.25 23.50

Fror Septoer 1 28.50 26.75 24.50

194From Jwaary 1 28.00 26.50 24.5 27.25

fers Fbruy 1 28.00 26.50 25.00 27.25Ore Iarch 1 28.00 26.75 25.00 27.50

Fres Writ 1 28.00 26.75 25.60 27.50 26.60 28.00 3

from Farury 1 27.50 26.75 25.5 27.50 26.60 27.s0fror prit 1 26.75 26.00 25.00 26.75 25.85 26.75 26.75 24.25

From july 1 25.2Z 24.25 23.00 26.75 24.2 #.# 25.25 24.25Frce Septebr 1 25565 24.5S 23.25 26.7S 24.5S 25645 25.65 24.25

fOrs 0ttber 1 26.10 25.00 23.50 26.7S 2S.00 26.10 26.10 24.25from Decbar 1 26.70 25.45 23.85 25.25 26.70

1006Fror J~ry 1 24.20 23.00 21.50 22.80 24.20res Jamary 1S 22.70 21.50 19.70 21.30 22.70

Fre Pebrusy 1 19.00 18.00 16.50 17.80 19.00Fres February 13 19.00 18.00 15.s 17.80 19.00From Fabriary 24 15.20 18.00 14.10 17.80 19.00

fre arch 1 13.75 13.00 11.25 12.85 13.75from sArh 16 13.25 12.50 11.1S 12.3S 13.25Fre April 1 13.25 12.50 11.25 12.35 13.25

Fras April 16 13.25 12.50 11.25 12.35 13.25frc May 1 12.25 12.25 11.25 12.35 12.25

Fro May 16 12.00 11.25 10.00 11.00 12.00Fre am 1 11.50 10.75 9.50 10.50 10.50

fre Am 21 10.00 10.75 9.50 l.A. 9.00from Juty 1 9.60 8.90 7.90 N.A. 8.70

fror July 16 7.35 6.70 6.00 6.40 7.35Oros Aimt 1 10.75 10.00 6.75 9.70 10.75

From A&aat 21 12.00 11.25 10.00 10.90 12.00Fror Stptosr 1 12.50 11.75 10.so 11.40 12.50

Fre Sptrer 16 13.10 12.3S 11.10 12.00 13.10

1919 24.36 20.90 17.70 21.601980 34.26 29.36 24.09 30.85

1979/80 33.45 28.18 22.75 29.291980/81 36.18 32.22 27.S4 33.601WM/2 32.97 29.54 27.10 s0.92"am 30.33 2.44 25.21 28.001983/84 28.00 26.7S 25.65 26.51 26.981984/85 27.70 26.70 25.30 26.49 28.30

Juty * O_cr 1983 26.47 26.70 U.24 26.57 26.50July - Du_s 1914 28.00 26.80 25.65 27.50 21.37 28.00 n.00

swc#: Eimptain Cswrat Petrotlg Corporation. Nddle Et tenormic

Survey. d Pe*troet= Intetllti-n Weekty.

N.A. Not svaitibteI/ the characteristics of th *ruda ar es, fottoe:

S: SLo 33X API.1.4 parcent sutpwr;tlyia BLtO 26S API,2.1 pert aulphur:as Oharlb Utef 24X API,3 percent eutpS;

eLyiweYorth 29M API;Ra Sudran 26X API;Rss at Other 32-n API;dit 8ay 33X APt

2/ Weighted arc4rdirg to ehr of total epsort. for 1979.thes ae .38 .42 ao .19- for Jamary-Runs 1980 .43 .38ai .19; for 1960/81. .48, .3S en .18; nd for 1981/U. .43,.42 .16

3/ *rr Muly 1.

- 125. -

Table 9.7: INST.LLED CAPACITY, ENERGY GENERATEDAND PEAK LOADS, 1956-1984

Installed CapacitY NW Eorl Gnrsted Nllt. KIh. PeakYear Thruma NIIro Total Thoel ldWro Total Load NW

1956 331 0 331 906 0 986 1861957 466 0 46 1 109 0 1.109 2101958 511 0 511 1.2" 0 1,264 2501959 511 0 511 1,422 0 1,422 2821960 541 256 797 1,668 250 1,8M 3721961 593 345 938 1,948 1,003 2.9l 5221962 593 345 938 2,001 1,162 3,163 5a1963 593 345 93 2,132 1,269 3,401 5901964 593 345 938 2,405 1,662 4,067 6591965 672 345 1,017 2,89? 1,738 4,635 501966 1,062 381 1,443 3,273 1,828 5,103 824196? 1,207 1,221 2,428 3,469 1,963 5,432 8721968 1,350 1,730 3,0 3,042 3,002 6,044 9301969 1,410 2,333 3,743 2,457 3,968 6,445 9871970 1,330 2,44S 3,m 2,225 4,690 6,915 1,1001971 1,330 2,445 3,m 2,282 5,041 7,323 1,1601972 1,330 2,4S 3,M 2,225 5,159 7,386 1,1761973 1,330 2,445 3,m 2,279 5,156 7,435 1,2481974 1,330 2,4S 3,m 2,397 6,122 8,519 1,4331975 1,330 2,445 3,M 3,009 6,790 9,?99 1,731976 1,346 2,445 3.789 3,63 8,003 l1,666 1,9091977 1,41S5 2,44S 3,860 4,479 9,038 13,517 2,2841978 1,460 2,445 3,905 5,078 9,935 15,013 2,5641979 1,784 2,45 4,229 6,751 9,608 16,359 2,8291980 2,286 2.44S 4,731 8,628 9,801 18,429 3.2391981 2,469 2,445 4,914 10,532 10,215 20,747 3,5531902 2,685 2,45 5,130 12,869 10,484 23,353 3,9001983 3,565 2,4S 6,010 16,063 9,816 25,879 4,3761964 4,538 2,4S 6,963 19,416 9,633 29,049 4.950

Source: Egyptian Electricity Authority

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Table 9.8a: ANNUAL GROWTH RATES OF ENERGY VALUE

O-U A M T I T Y V A L U E

Enermy Increcs or Dwerease Volua in Inrease or DeoreaseYear N Itl. KWh Mitl. Ksh II Thos. Lg Thous. Lg X

1972 6,169.4 49.0 0.8 45,527 2,404 5.61973 6,178.0 8.6 0.1 ,2m 765 1.61974 6,695.1 ?17.1 11.6 50,161 3,869 8.31975 8,307.6 1,412.5 20.5 74,303 24,142 48.11976 9,661. 1,353.5 16.3 83,307 9,004 12.11977 11,488.9 1,827.4 18.9 91,977 8,670 10.41973 12,722.5 1,233.6 10.7 110,253 18,276 19.91979 14,546.1 1,823.5 14.3 107,288 2,065 2.71980 16,113.? 1,567.6 10.8 120,356 13,068 12.21961 17,940.1 1,827.0 11.3 133,995 13,639 11.3

1961/82 19,036.4 1,800.8 10.4 145,036 17,421 13.71982/83 21,546.4 2,510.0 13.2 179,747 34,711 23.91983/84 24,629.6 3,083.0 14.3 240,208 60,461 33.6

Table 9.8b: GROWTH OF ENERGY SOLD BY ZONES1981/82-1982/8S

Q U A NT ITY (mf Il. VAd) V AL U E (Thouis. LE)

Zone 1982/n3 1981/82 Increase () 1982/83 198i/82 inerease (M)

Cairo 7,292.1 6,376.3 14.4 69,337 57,386 20.8Altxndria 2,540.5 2,336.4 8.7 22,259 19,432 14.5

Lower Egypt 3,906.2 3,360.3 16.2 35,322 28,948 22.0Canal 1,591.3 1,401.3 13.6 15,416 11,767 31.0

Upper Egypt 6,216.3 5,562.1 11.8 37,413 27,503 36.0TOTAL 21,546.4 19,036.4 13.2 179,74? 145,036 23.9

Table 9.8c: GROWTH OF ENERGY SOLD BY ZONES1982/83-1983/84

aU A N T ITY (mill.t kh) V A L U E (Thous. LE)

Zone 1983/84 19S2/83 Increase CI) 1983/84 1982/83 Increase CI)

Cairo 8,044.9 7,292.1 10.3 88,SS0 69,337 27.7Altexndrfe 3,002.7 2,540.5 18.2 30,740 22,2S9 38.0

Lower Egypt 4,413.6 3,906.2 13.0 45,658 35,322 29.3Canl 1 1,2. ,591.3 22.7 22,770 15,416 47.7

Upper Egypt 7,216.3 6,216.3 16.1 52,490 3t,413 40.3TOTAL 24,629.6 21,546.4 14.3 240,208 179,74? 33.6

- 127 -

Table 10.1: TOURIST ACTIVITY

Estimated1974 1975 1976 1977 I97 1979 1980/81 1981/82 198V2/ 1983/84 1984/85

Arrivals (Thousands) 679 793 984 1004 1052 1064 1341 1369 1467 1537 1575

Arab ComtrIfes 41 4-I 31; 4M 133 5f 624 35I 3-TO.E.C.D. Countrfes 198 278 362 434 503 57s 684 654 709 799 844Socialist Cow,tries 34 3S 35 31 25 31 24 22 25 26 26

Others 34 42 S3 64 68 61 107 ¶15 109 114 114

Nights Spent (Thousands) 6294 5855 6796 6339 7137 7to5 9310 9622 9019 8671 9042

Arab Countries 4544 32 4081 3529 3717 308 416 Z279 457 391iO.E.C.D. Countries 1240 1739 2214 2347 294? 3375 4S0S 4391 4279 4117 4588Socialist Countries 287 279 237 16S 116 100 90 83 69 71 7I

Others 223 215 264 298 357 222 609 544 392 426 462

Total ExpenditureCog Estimate(sill. LE) 358 332 248 239 336

(mitl. US$) 511 408 296 284 409Nin.of Tourism Est.(mill.LE)1/ 970 12S3 1447 1557 1609

(miUt. US#) 1276 1330 1341 1403 1362

Expenditure per Night (LE) 104 130 160 180 In

Mama Itema:

Exchange Rate(USS/LE) 2.40 2.18 2.00 1.86 1.69 1.43 1.43 1.23 1.23 0.89 0.e3

Source: Ministry of Tourism.1/ Adjusted by the Ministry for the exclusion in the Central Bank

exchange control records of currency conversions In thetree market.

Table 11.1: SUEZ CANAL TRAFFIC

1977 1978 1979 1980 1980/81 1981/82 1982/83 1983/84 1984/8S

Number of transits 19,703 21,266 20,363 20, 795 21,182 21,921 22,760 21,725 20,567

Of which: ofl tankers (2,619) (2,489) (2,698) 2.921) (3.177) (3,518) (3,522) (3,638) (3,425)

Net tonnage of transiting vessels 220.5 248.3 266.2 281.3 308.0 353.4 368.4 383.3 355.8(million tons)

Of which: oil tankers (75.8) (73.9) (86.3) (88.9) (110.6) (135.4) (128.6) (143.4) (121.2)

Cargo transited (million tons) 128.7 149.8 160.6 176.3 182.2 218.5 239.6 263.9 262.9

Of which: petroleum and products (34.9) (33.2) (36.3) (42.5) (45.2) (70.1) (89.7) (102.2) (97.0)

total receipts (USS millions) 429 515 587 657 779 91? 969 982 89'

Source: Suez Canal Authority

- 128 -

Table 12.1: W,I1OLESALF PRICE INDEX(1965/66 - 100)

End of Period 1974 1975 1976 1977 1978 1979 1980 1980/81 1981/82 1982/83 1983/84

Agricultural crops (27.6) 1/ 172.3 178.7 205.0 240.6 253.9 292.7 341.0 &6.5 395.5 537.6 613.3Foodstuffs and beveroges 19.9) 168.9 190.0 213.2 236.1 247.4 299.7 339.8 357.0 394.6 499.6 544.3

Tobacco and tobacco products (7.1) 122.6 122.7 122.7 122.9 123.0 134.3 138.1 138.4 138.4 151.1 151.0Yarn, textiles, etc. (20.5) 122.3 122.4 125.3 128.1 173.0 184.1 224.7 236.6 247.0 255.2 265.8

Petroletm and fuels (7.4) 138.3 148.7 157.8 159.5 170.8 192.1 229.2 239.4 246.2 271.7 280.7Paper (1.2) 258.4 258.7 257.2 241.0 248.1 317.0 390.0 423.8 423.8 443.6 471.0Wood (1.2) 255.9 2SS.9 358.6 370.7 238.1 365.7 482.2 478.1 483.7 483.8 505.1

Constructfon materials (2.6) 151.7 179.2 188.6 212.1 261.4 390.2 412.9 469.4 552.4 573.9 619.4Ndfoines (1.6) 107.9 110.2 110.2 158.3 158.3 158.3 182.4 183.2 186.4 211.7 211.7

Chemical producte (2.8) 118.5 12S.3 130.8 130.8 134.7 162.1 182.2 191.0 224.0 232.7 233.9Meat and metal products (1.0) 16S.8 178.1 190.7 213.8 237.5 251.0 292.8 333.2 348.8 363.5 412.2

Transportation equipamnt (1.0) 173.9 173.9 173.9 195.8 232.9 264.8 264.8 287.8 311.6 356.8 361.0

All items (100.0) 161.8 161.8 178.5 196.9 213.0 249.4 286.6 306.6 331.8 403.9 441.7

Source: Central Agency for Public Nobilization and Statistics

1/ The naabers in parentheses are comod1ity weights. The weightsindicated do not sum to 100.0 as the Indox for all item alsoincludes (with weights fn parenthes s) poultry and ffsh (3.4),inedible animal products (0.8). tanrd skins (0.3), householdappiance (1.2). and morhiry and equipemnt (0.4)

Table 12.2: CONSUIIER PRICE INDEX FOR URBAN POPULATION(1966/67 = 100)

End of Period 1974 1975 1976 1977 1978 1979 19e0/81 1981/82 1982/83 1983/84 1984/85

Food and beverag (52.5) 1/ 161.3 181.9 209.2 231.3 254.7 277.3 393.3 458.8 566.7 676.1 734.4

Cereals (11.2) 120.9 121.5 12S.8 135.8 139.3 134.4 191.3 216.0 23S.7 243.5 376.8Pultes (6.6) 186.1 202.1 218.1 256.9 273.9 305.4 512.2 512.7 588.6 701.2 766.3

Meat, fish and eggs (13.1) 190.3 234.2 287.8 316.2 331.8 383.7 504.2 ;72.7 762.9 849.9 893.8Dairy products (5.9) 173.3 216.6 240.9 279.6 315.4 3M.9 462.5 5.'..6 660.6 796.7 827.4

Vegetables (3.8) 210.4 218.5 276.8 241.3 331.7 336.8 424.7 49. 6 594.4 784.8 820.7Fruits (2.9) 154.2 187.6 230.2 263.6 362.2 392.4 422.7 1101.' 1719.9 2428.5 2489.9

Housing (15.7) 106.5 108.6 109.1 109.5 110.2 111.2 114.3 113.7 118.6 119.1 121.7Furnitur and other durables (1.3 109.0 128.4 136.3 156.3 181.1 187.7 201.3 283.9 293.3 328.1 349.6

Clothing (8.4) 129.9 140.1 147.4 188.1 239.1 247.5 310.6 344.8 387.0 475.8 558.8Transportation and

comumication (4.4) 123.1 122.6 136.0 144.7 145.1 185.6 207.9 313.2 311.2 316.8 316.8Services (9.9) 127.3 140.5 144.0 180.8 203.8 244.2 271.5 329.5 38C 4 507.9 619.4

Personal expses (7.8) 120.4 125.0 128.1 133.9 160.7 187.9 213.7 223.0 230.3 283.4 309.2

All items (100.0) 141.0 155.2 171.2 191.1 212.6 233.5 307.0 356.0 422.1 505.2 567.3

Source: Central Agency for Ptblic Mobilzatfion and Statistics.

1,' The numbers in parentheses are indicatfvo commodity weights based on the commodity weightsemployed in five reginal sbindice and population weights for these regions.The refonl weights ar based on a family budget survey of 1964/65 and thesaple population cenus of 1966.

- 129 -

Table 12.3: DEFLATORS(1981/82 = 100)

1974 1975 1976 197 1978 1979 1980/81 1981/82 1982/83 1983/84 1984/85

Conuedity Seotore

Agriculture 41.0 44.3 S1.9 62.4 66.3 70.S 88.0 100.0 112.9 131.0 151.9Industry * Mining 48.3 53.5 56.0 59.2 66.0 76.6 87.M 100.0 109.9 126.4 145.5

Petrola 23.3 22.0 24.0 29.4 32.3 89.1 111.8 100.0 9S.0 91.6 88.7Electricity & P.U. 81.3 82.6 81.8 81.0 79.9 8S.8 96.0 100.0 107.3 117.6 130.2

Construction 26.7 42.1 50.3 57.1 63.6 72.2 86.7 100.0 113.1 132.3 1s4.9

Distribution Sectors

Trwep., Cam., Store 67.4 70.0 74.2 78.0 83.0 84.2 95.6 100.0 111.4 124.8 141.0Sue Canal 44.6 U.6 44.3 44.0 65.2 77.3 86.1 100.0 104.9 110.8 125.2

Trad, Fin., Insurance 40.8 44.9 51.2 57.7 64.8 73.4 87.0 100.0 111.9 129.8 150.6

Service Sectors

aousins 98.0 98.0 96.8 98.4 99.2 101.2 98.9 100.0 100.6 112.6 126.3other Servicea 42.9 48.4 48.9 57.6 66.0 74.9 86.4 100.0 112.0 129.9 150.7

(Tozrism) ("4.1) (S0.9) (56.7) (63.7) (70.2) (76.7) (86.6) (100.0)

GDP at Factor Cost 43.2 47.3 S0.9 S6.9 62.5 76.7 91.6 100.0 108.8 122.3 137.9d

Total Investment 41.0 6.8 S1.S 58.2 "6.6 80.2 92.1 100.0 108.8 124.0 138.9--

Total Fixed Investment 41.0 46.8 S1.5 58.2 66.6 80.2 92.1 100.0 108.8 124.0 138.9PubLic fixed Investment 41.0 46.8 51.5 58.2 66.6 80.2 92.1 100.0 108.8 124.0 138.9

Total Consumption 37.4 41.S S0.1 SS.4 63.4 74.0 86.s 100.0 109.0 118.9 135.6Public 37.4 41.S 50.1 5S.4 63.4 74.0 86.9 100.0 109.0 118.9 135.6Private 37.4 41.5 50.1 SS.4 63.4 74.0 86.9 100.0 109.0 118.9 135.6

Total Expenditure 38.1 42.9 50.4 56.1 64.3 75.6 88.2 100.0 109.0 120.2 136.4

GOP at NP 41.4 45.7 51.4 S6.5 62.7 76.7 91.6 100.0 108.8 122.3 137.9

WIt 98.0 1o0.0 102.0 98.5 99.4

Source: Ninistry of Planning and IORD estimetes.

- 130 -

Table 12.4: IMPORT AND EXPORT ($) PRICE INDICES(1981/82 - 100)

Estimated- 1974 1975 1976 1977 1978 1979 1980/81 1981/82 1982/83 1983/84 1984/85

teort Price Indies

FoodWheet & Flour n.1 57.5 54.9 5S.6 63.1 7s.7 90.9 100.0 89.5 89.5 88.7

Other Agricultural Con. 60.0 59.2 63.8 70.6 75.9 85.1 9.3 100.0 92.4 88.7 83.2Petroleum 31.4 34.4 36.9 40.6 43.6 80.6 111.7 100.0 94.5 8.7 82.1

Othwr Intermediate Goods S1.7 59.0 62.7 67.7 n.8 81.5 91.3 100.0 102.0 98.5 99.5Capital Goods S1.7 59.0 62.7 67.7 72.8 81.5 91.3 100.0 102.0 98.5 99.5

manufawtured Con. Goods 52.2 59.5 63.2 68.3 73.5 82.3 92.1 100.0 103.9 100.4 101.4

Total GoodB S2.5 56.4 60.2 64.7 70.3 80.7 92.2 100.0 99.3 96.3 95.2

Mon-Factor Services S2.2 59.5 63.2 68.3 73.5 82.3 92.1 100.0 107.0 103.3 104.3

Weighted Average(Goods & NFS) 52.8 56.8 60.5 65.1 70.8 80.9 92.3 100.0 100.1 97.0 96.3

Export Prfee Indies

Cotton 9f.S 70.8 89.5 90.2 85.3 85.3 98.0 100.0 111.7 117.9 114.6Other Agricultural Cam. 93.7 64.1 64.9 68.8 78.2 82.9 95.3 100.0 105.7 101.5 'WS I

Petrotea 31.4 34.4 36.9 40.6 43.6 80.6 111.7 100.0 92.9 88.3 -83.5Textiles 70.5 59.0 62.6 66.8 71.9 80.5 92.6 100.0 106.0 111.3 108.0

other MNuwfactured Goods S2.1 60.3 64.0 68.3 73.5 82.3 92.2 100.0 104.0 100.5 101.4Total Manufactures

Total Goods SS.3 46.8 48.6 51.8 53.6 79.4 107.0 100.0 95.9 92.2 87.9

Sez 92.2 100.0 106.0 112.1 118.3Tourism 91.3 100.0 108.0 112.2 116.3

Other NFS 92.2 100.0 107.9 116.0 124.1Total mon-Factor Services S2.0 59.4 63.1 68.1 73.3 82.1 91.9 100.0 107.3 114.2 121.0

Woighted Average(Goods+NFS) 56.0 50.5 52.5 56.1 59.0 80.6 101.0 100.0 98.3 98.4 97.0

Source: Central Sank of Egypt and 18RD estimates.

-131-

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