Economy of Egypt
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Overview
A series of International Monetary Fund arrangements, coupled with massive external debt relief resulting from Egypt's participation in the Gulf War coalition, helped Egypt improve its macroeconomic performance during the 1990s. Through sound fiscal and monetary policies, Cairo tamed inflation, slashed budget deficits, and built up foreign reserves. Although the pace of structural reforms, such as privatization and new business legislation, has been slower than the IMF envisioned, Egypt's steps toward a more market-oriented economy have prompted increased foreign investment. Lower combined hard currency inflows - from tourism, worker remittances, oil revenues, and Suez Canal tolls - in 1998 and the first half of 1999 resulted in pressure on the Egyptian pound and sporadic dollar shortages, but external payments were not in crisis. Despite ample reserves, the Central Bank did not provide sufficient hard currency to commercial banks and Cairo restricted imports for a short period; these developments confirmed to some investors and currency traders that government financial operations lack sufficient coordination and openness. Monetary pressures have since eased, however, with the continued oil price recovery starting in mid-1999 and a moderate rebound in tourism. Increased gas exports are a major plus factor in future growth.
Economy: in greater detail
Under comprehensive economic reforms initiated in 1991, Egypt has relaxed many price controls, reduced subsidies, and partially liberalized trade and investment. Manufacturing is still dominated by the public sector, which controls virtually all heavy industry. A process of public sector reform and privatization has begun, however, which could enhance opportunities for the private sector. Agriculture, mainly in private hands, has been largely deregulated, with the exception of cotton and sugar production. Construction, non-financial services, and domestic marketing are largely private. This has promoted a steady increase of GNP and the annual growth rate. Among Arab countries, Egypt's GDP is second only to Saudi Arabia's. However, the Egyptian economy relies heavily on tourist revenues. The tourism sector suffered tremendously following a terrorist attack on tourists in Luxor in October 1997, and the September 11, 2001 terrorist attacks against the United States, affecting the economy as a whole.
Agriculture
Approximately one-third of Egyptian labor is engaged directly in farming, and many others work in the processing or trading of agricultural products. Practically all Egyptian agriculture takes place in some 25,000 km² (6 million acres) of fertile soil in the Nile Valley and Delta. Some desert lands are being developed for agriculture, including the ambitious Toshka project in Upper Egypt, but some other fertile lands in the Nile Valley and Delta are being lost to urbanization and erosion.
Warm weather and plentiful water permit several crops a year. Further improvement is possible, but land is worked intensively and yields are high. Cotton, rice, wheat, corn, sugarcane, sugar beets, onions, and beans are the principal crops. Increasingly, a few modern operations are producing fruits, vegetables and flowers, in addition to cotton, for export. While the desert hosts some large, modern farms, more common traditional farms occupy one acre (4,000 m²) each, typically in a canal-irrigated area along the banks of the Nile. Many small farmers also have cows, water buffaloes, and chicken, although larger modern farms are becoming more important.
The United States is a major supplier of wheat, corn, and soybean products to Egypt, almost all through commercial sales. Egypt is, in fact, the U.S.'s largest market for wheat sales. U.S. agricultural sales to Egypt total $1 billion annually. U.S. food assistance programs to Egypt ended in 1992 as Egypt became more prosperous. Egypt continues to receive modest food assistance through the World Food Program and from France.
"Egypt," wrote the Greek historian Herodotus 25 centuries ago, "is the gift of the Nile." The land's seemingly inexhaustible resources of water and soil carried by this mighty river created in the Nile Valley and Delta the world's most extensive oasis. Without the Nile, Egypt would be little more than a desert wasteland.
The river carves a narrow, cultivated floodplain, never more than 20 kilometers wide, as it travels northward toward Cairo from Lake Nasser on the Sudanese border, behind the Aswan High Dam. Just north of Cairo, the Nile spreads out over what was once a broad estuary that has been filled by riverine deposits to form a fertile delta about 250 kilometers wide (150 mi.) at the seaward base and about 160 kilometers (96 mi) from south to north.
Before the construction of dams on the Nile, particularly the Aswan High Dam (started in 1952, completed in 1970), the fertility of the Nile Valley was sustained by the water flow and the silt deposited by the annual flood. Sediment is now obstructed by the Aswan High Dam and retained in Lake Nasser. The interruption of yearly, natural fertilization and the increasing salinity of the soil has been a manageable problem resulting from the dam. The benefits remain impressive: more intensive farming on thousands of square kilometres of land made possible by improved irrigation, prevention of flood damage, and the generation of millions of gigajoules of electricity at low cost.
The Western Desert accounts for about two-thirds of the country's land area. For the most part, it is a massive sandy plateau marked by seven major depressions. One of these, Fayoum, was connected about 3,600 years ago to the Nile by canals. Today, it is an important irrigated agricultural area.
Natural Resources
In addition to the agricultural capacity of the Nile Valley and Delta, Egypt's natural resources include petroleum, natural gas, phosphates, and iron ore. Crude oil is found primarily in the Gulf of Suez and in the Western Desert. Natural gas is found mainly in the Nile Delta, off the Mediterranean sea shore, and in the Western Desert. Oil and gas accounted for approximately 7% of GDP of fiscal year 2000-01.
Export of petroleum and related products amounted to $2.6 billion in the year 2000. In late 2001, Egypt's benchmark "Suez Blend" was about $16.73 per barrel ($105/m³), the lowest price since 1999.
Crude oil production has been in decline for several years, from 45,200,000 t in 93/94 to 37,000,000 t in 99/00. Oil production in late 2001 was about 118,000 m³ (740,000 barrels) per day. To minimize the growing domestic demand of petroleum products (approximately 23 mmt) Egypt is encouraging the production of natural gas. Natural gas output continues to increase and reached 18 mmt of oil equivalents in 2001.
Over the last 20 years, more than 217 oil exploration agreements have been signed and multinational oil companies spent more than $27 billion in exploration companions. These activities let to the findings of about 18 crude oil fields and 16 natural gas fields. As a result of these findings, crude oil reserves as of September 2001 are estimated at 445 million m³ (2.8 billion barrel), and proven natural gas reserves are 1,600 km³ (55 trillion ft³) with a likely additional 1,800 km³ (65 trillion ft³). Texas-based Apache Oil Company is the largest American investor in Egypt, with a total investment of more than $1.6 billion since 1996.
Egypt's excess of natural gas will more than meet its domestic demand for many years to come. The Ministry of Petroleum has established expanding the Egyptian petrochemical industry and increasing exports of natural gas as its most significant strategic objectives.
Egypt and Jordan are cooperating to establish the Eastern Gas Company to export natural gas to Jordan; the expected date of completion is by mid-2003. It is estimated that Egypt will be able to export to Jordan 1.1 to 3 km³ of gas per year. Total investment in this project is about $220 million.
GDP: purchasing power parity - $295.2 billion (2003 est.)
GDP - real growth rate: 3.1% (2003 est.)
GDP - per capita: purchasing power parity - $4,000 (2003 est.)
GDP - composition by sector:
agriculture:
17%
industry:
32%
services:
51% (1999)
Population below poverty line: 16.7% (2000)
Household income or consumption by percentage share:
lowest 10%:
3.9%
highest 10%:
26.7% (1991)
Inflation rate (consumer prices): 3.7% (1999)
Labor force: 19 million (1999 est.)
Labor force - by occupation: agriculture 40%, services 38%, industry 22% (1990 est.)
Unemployment rate: 9.9% (2003 est.)
Budget:
revenues:
$20.7 billion
expenditures:
$22.3 billion, including capital expenditures of $NA (FY98/99)
Industries: textiles, food processing, tourism, chemicals, petroleum, construction, cement, metals
Industrial production growth rate: 5% (1999 est.)
Electricity - production: 69,960 GWh (2001)
Electricity - production by source:
fossil fuel:
78.72%
hydro:
21.28%
nuclear:
0%
other:
0% (1998)
Electricity - consumption: 54,000 GWh (1998)
Electricity - exports: 0 kWh (1998)
Electricity - imports: 0 kWh (1998)
Agriculture - products: cotton, rice, corn, wheat, beans, fruits, vegetables; cattle, water buffalo, sheep, goats; fish
Exports: $8.7 billion (f.o.b., 2003 est.)
Exports - commodities: crude oil and petroleum products, cotton, textiles, metal products, chemicals
Exports - partners: EU 47%, US 14%, Turkey 8% (1998)
Imports: $14.7 billion (f.o.b., 2003 est.)
Imports - commodities: machinery and equipment, foodstuffs, chemicals, wood products, fuels
Imports - partners: EU 42%, US 16%, Japan 5% (1998)
Debt - external: $30 billion (1999 est.)
Economic aid - recipient: ODA, $2.25 billion (1999)
Currency: 1 Egyptian pound = 100 piasters
Exchange rates: Egyptian pounds per US$1 - market rate - 3.4050 (January 2000), 3.4050 (1999), 3.3880 (1998), 3.3880 (1997), 3.3880 (1996), 3.3900 (1995)
- See also : Egypt