Stabilization and Adjustment in Egypt

Stabilization and Adjustment in Egypt

Reform or De-Industrialization

Gouda Abdel-Khalek

This book studies the impact of Egypt’s Economic Reform and Structural Adjustment Programme (ERSAP), the effects of which have been of great interest to the international community. Organizations such as the World Bank and the IMF uphold the programme as a success story and example for other countries to follow. ERSAP also has its critics, however, who resent its tendency to downsize government and fear possible negative effects on growth and development. The author discusses these concerns along with those regarding the possible negative social effects of ERSAP.

Chapter 2: Economic “Reform”

Gouda Abdel-Khalek

Subjects: development studies, development economics, economics and finance, development economics


2. Economic ‘reform’ in the 1990s PRELUDE TO ERSAP As already mentioned in the previous chapter, following a series of protracted negotiations starting in 1989, Egypt concluded agreements with both the IMF (in May 1991) and the World Bank (in November 1991) on a stabilization and adjustment package. These made up the core of the reform programme known as ERSAP.1 It may be said that such a package represents, in a real sense, a natural extension of the policies that were adopted since the mid 1970s under the open-door policy (infitah), and the stabilization and adjustment attempts in the 1970s and 1980s. However, it seems to go much further in reworking the institutional fabric of the Egyptian economy to become a truly private enterprise market-oriented economy. We have argued elsewhere (Abdel-Khalek, 1994), on the basis of Egypt’s past experience, that the package failed to take serious account of some important structural features of the Egyptian economy – notably, food deficit, dollarization, and the prevalence of significant idle capacity. It was also maintained that the ERSAP package may have followed the wrong sequencing by stressing trade, interest rate and exchange rate ‘reform’ long before dealing with the real economy (in other words, exchange appears to have taken precedence over production). We also argued that the sustainability of the programme could prove problematic in view of the draconian nature of some of the components and the harsh conditionality attached. In addition to the analysis of Chapter 1, several studies of...

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