Egypt’s Broken Economy
WASHINGTON, DC – Egyptians’ political aspirations have dominated the country’s public life since the fall of President Hosni Mubarak last year. Unfortunately, as those aspirations are addressed, the economy has entered a steep decline, jeopardizing one of the revolution’s main goals, namely improvement in Egyptians’ living standards and welfare.
Indeed, the populist rhetoric of Egyptian politicians threatens to undo the economic reforms undertaken by the Mubarak regime. In 2004, a major reform program was launched under former Prime Minister Ahmed Nazif. It was aimed at removing bureaucratic constraints to growth by restructuring the financial sector, streamlining business regulations, liberalizing foreign trade, and reducing the government’s role in the economy.
The 2004 reforms, with their elimination of restrictions on access to foreign exchange and reduction of import tariffs, gradually improved the business and investment climate. Coupled with favorable international conditions, Egypt’s annual GDP growth rate rose to 7.2% in 2008, from 4.1% in 2004, and remained at 5% in 2009-2010, despite the global recession. The new measures also helped to attract large capital inflows and foreign direct investment, underpinning a dramatic rise in foreign-currency reserves, from $14.8 billion in 2004 to more than $36 billion by the end of 2010.