Stabilization and Adjustment in Egypt
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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.
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Chapter 7: ERSAP and Industrialization: Concluding Remarks

Gouda Abdel-Khalek

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7. ERSAP and industrialization: concluding remarks Since joining the International Monetary Fund in 1945 as an original founding member, Egypt has signed five stabilization agreements with the Fund. These agreements were: a credit facility in May 1962, which collapsed fairly rapidly; a stand-by arrangement in April 1977; an extended fund facility in July 1978; another stabilization package in May 1987, which was supported by a stand-by credit of SDR 250 million; and finally the stabilization package under the Economic Reform and Structural Adjustment Programme (ERSAP) which has been through various stages since the beginning of the 1990s. The various packages since the late 1970s and 1980s must be viewed against a dismal background of a stagnant economy, rapidly rising inflation (estimated unofficially at 30 per cent in mid-1987) and a budget deficit which approached 23 per cent of GDP in 1985/86 – and possibly even higher in 1987/88. The elements of the packages mentioned above reflected with varying degrees the main policy recipe propagated by the IMF. Invariably, they included the following measures; trade liberalization; gradual devaluation-cumunification of the exchange rate; raising energy prices; decontrol of the prices of agricultural commodities; action to reduce the budget deficit as a proportion of GDP; liberalization of interest rates; setting limits on monetary expansion; privatization; and, lately, a social safety net. Commitments under a stabilization agreement usually include some strategy-related stipulations in addition to the specific policy measures in different areas. Such commitments, be they of the...

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