Chapter 3: The Macroeconomic Effects of ERSAP: Structural Reform or Dutch Disease?
INTRODUCTION In this part of the study, we shall examine the most important effects of ERSAP at the macroeconomic level. Some aspects of the economic impact of ERSAP were discussed before, dealing with effects on the balance of payments, the budget deﬁcit, inﬂation and output and employment (Korayem, 1993). Special emphasis will be placed here on particular elements of the programme which we deem critical for studying the impact of ERSAP on the prospects of industrialization in Egypt. Foremost among these are trade policy reform, foreign exchange reform and ﬁnancial liberalization. Monetary and ﬁscal policies under the programme will only be dealt with in the context of examining the other elements just mentioned. Some guiding principles will be adopted as criteria for judging the effects of ERSAP at the macroeconomic level. These include growth, equity, and employment generation (Abdel-Khalek, 1994). In addition, the main structural features of the Egyptian economy will be highlighted in order to serve as a background for determining the likely effects of ERSAP. Three such features deserve attention, namely: the large food deﬁcit, heavy reliance on imported intermediates and the importance of external shocks. EXTERNAL SHOCKS – NATURE AND MAGNITUDE As a background to the analysis of the impact of ERSAP, it is necessary to examine the external shocks which impacted on the Egyptian economy in the second part of the 1980s and the policy responses to these shocks. In this context, it is important to emphasize that the Egyptian economy has become rather...
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