Egypt is planning to ask for at least $2.5 billion in loans and direct aid to help its ailing economy deal with the effects of the September 11 terrorist attacks in the United States. Thirty-seven international donors gathered in the Egyptian resort town of Sharm el Sheikh for a two-day meeting to discuss how much Egypt should receive in return for greater economic reform.
Egypt faces a host of problems - soaring unemployment, a huge trade deficit, a tourism industry in tatters, employers shutting down their businesses, troubling comparisons of the country's economy to Argentina's, a monetary system losing its value and increasing criticism of the government.
Economists in Egypt say the economy was already in decline last year. But after the September 11 terrorist attacks in the United States, they say the economy began to plunge. Many economists now say Egypt's economy is in crisis.
In a nation of 67 million, the most populous among the Arab states, the Egyptian economy is heavily dependent on tourism. The Egyptian government says the tourism industry lost $3 billion last year. Tourism revenues in 2000 totaled a record $4.3 billion.
Despite a decade of economic reforms aimed at producing an export-driven economy, Egypt's exports for 2000-2001 totaled just over $7 billion while imports totaled $16.5 billion. That left the country with a trade deficit of more than $9 billion.
World Bank estimates indicate a sharp decline in the rate of new development in Egypt. Ahmed el Naggar is an economic specialist at the al Ahram Center for Political and Strategic Studies in Cairo. He says new development is down.
Mr. el Naggar says the official indicators show "the rate of development in Egypt was at 6.1 percent in fiscal 1998-1999." Now, he says, the World Bank estimates the rate of growth will not exceed 3.3 percent for the year 2001.
Facing a liquidity squeeze and slowing economic activity, the country devalued the Egyptian pound four times in 2001. The pound lost more than 24 percent of its value as the government looked to increase foreign investment.
Gouda Abdel Khalek is a professor of economics at Cairo University. He says Egypt must begin a program aimed at building the economy from within. Mr. Khalek says it is a mistake for Egypt to rely on donor nations to help "bail it out of its current economic crisis."
"Egypt," he says, "has to look within itself and into itself to re-work its priorities, seriously put in place an austerity program whereby the basis would be to force Egyptians to rely on themselves to help themselves first. I, quite honestly, don't subscribe to this view of every now and then extending a hand to others to help. That's not the way to run a country. And, by the way, the Egyptian economy is not the only economy in the world to be hit by the September 11 events and that shouldn't, in any way, be an excuse for the government to cry for outside help."
Other economists say Egypt needs help from the outside in order to fund an austerity program. The Egyptian government says the official unemployment rate is about 7.5 percent. But economists who spoke with VOA said the government's numbers can't be trusted. Many economists say the real rate of unemployment is about 16 percent, which would mean more than three million Egyptians are unemployed.
Economist Ahmed el Naggar says Egypt should be more open about unemployment figures. Mr. El Naggar says, "there is a real crisis regarding the level of employment in Egypt but the solution is not in hiding the figures or saying it's 6.1 percent or 7.6 percent. The solution is to unveil the real figures. In Spain the ratio of unemployment five years ago was 24 percent. But it didn't hide that. Instead it organized a program to shrink unemployment and now it's currently 13 percent. So, in Egypt, we are in need of this clarity."
Ahmed el Ghandour is the former Dean of Economics at Cairo University. He says there is a prevailing belief among economists that the Egyptian government tends to provide inaccurate information in an effort to hide the seriousness of the deteriorating economy. "It is a problem," he says. "It's a problem. Now, there is claims everywhere that numbers issued by the government should be re-examined in order to know the real situation because solutions cannot be attained if it is based on figures that are not correct."
Another problem, according to economics professor Gouda Abdel Khalek, is a low rate of domestic savings. "You haven't heard the government echo any concern about this issue in a country with twice the per capita income as India you have a domestic saving rate, which is less than the domestic saving rate in India," he says. "That actually, in itself, is quite curious and it means this is a very neglected aspect of managing the economy and it simply produces a savings investment gap and the echo of that gap is the export-import gap, which is the trade deficit."
Economists who spoke with VOA said there are comparisons between Egypt's current economic crisis and that facing Argentina. But President Hosni Mubarak says the comparison cannot be made because unlike Argentina Egypt's external debts are manageable. Argentina has been rocked by a four year recession that has led to a default on part of its $141 billion public debt, a massive devaluation and a run on banks that has forced the government to impose limits on cash transfers abroad.
Egypt's external debt, according to the government, amounts to 27 percent of its gross domestic product. Mr. Mubarak describes that amount as being at "safe levels."
The former Dean of Economics at Cairo University disagrees. Ahmed el Ghandour says Egypt needs cash from the donor nations in order to ensure the country's political stability.
Mr. Ghandour said, The main sources of instability in Argentina are existing in Egypt. That's why, once again, we should look forward for a successful meeting in Sharm el Sheikh because the stability of Egypt is not merely an economic one it is political, too. Stability of Egypt is important to stability in the region, as a whole and stability in the region is needed for stability in the international community.
The Egyptian government says its priorities are to help modernize industry and the service sector, create jobs and better job training facilities.