Egyptians Watch Sinking Economy Drop Even Further
EACH day the Gulf war continues, Egypt's debilitated economy worsens. Egyptians returning from Iraq and Kuwait are clamoring for jobs, revenues from salaries of other workers in the Gulf are down, as are tourism and earnings from the Suez Canal. These problems have aggravated the persistent trials of a massive $50 billion foreign debt, rapidly growing population, and bloated public sector.Skip to next paragraph
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Western and Gulf countries' promises of aid and forgiveness of debt and the government's struggle to go ahead with the International Monetary Fund's (IMF) reforms may give the economy some relief in the future. In the meantime, Egyptians are using every means they can to survive.
Nowhere are Egypt's economic woes more evident than in the tourist industry. Tour operators say almost all tours have canceled. Hotel lobbies remain empty, and airlines are canceling flights because of the decrease of travel.
Another problem created by the war is the return of more than 500,000 workers from Iraq and Kuwait. These people will not only need jobs, but their arrival means a sharp decrease in foreign remittances for Egypt as well.
Suez Canal earnings are also down, a result of increased insurance premiums on ships going the waterway, according to Ezzat Adel, the canal's chairman.
In total, the soaring costs from the Gulf war were recently estimated at $13.7 billion, twice the original figure, according to Prime Minister Atef Sedki.
Surprisingly, despite the economy's continued decline, there are not hordes of idle Egyptians on the street, nor are they starving. As times get tougher, the people are using their characteristic resourcefulness to get by.
They scrape out a living in the most unlikely ways, sharpening knives, locating parking spaces on Egypt's busy streets, delivering tea, and dispersing wafts of incense.
Oriental carpet repairers are tucked into the nooks and crannies between rows of shops, peddlers of facial tissue maneuver through traffic, and fruit and vegetable sellers are asleep in front of their crates loaded with produce. This is Egypt's informal market, a growing segment that is helping relieve the people's financial pressures.
``It has and it is keeping people employed,'' said Heba Handusa, the former head of American University in Cairo's economics department. ``It's the sector that's most sensitive in providing new jobs.''
There exists little information about the informal market by its very nature.
``It is the sector which the government knows nothing about and desires to know nothing about,'' said Ibrahim el-Issawy, economics professor at the Institute of National Planning. Records on this sector are nearly nonexistent, because of its unofficial, spontaneous nature.
Because analysts cannot agree on a precise definition, estimates of the percentage of people participating in the informal market in Egypt range from 5 percent, according to the official Central Agency for Public Mobilization and Statistics, to 80 percent.
Businesses of this type tend to be lucrative.
``Wages from these multi-activities are higher than from government jobs,'' says Mustafa Kharoufi, a researcher with a French institute in Cairo who is studying the informal markets. Frequently, he says, the wages are three to four times higher than the $17 to $24 a month average civil worker's salary.
Economists see the informal market getting bigger as the Gulf crisis continues and Egypt's economic woes increase, but they also warn it is not a panacea for all Egypt's economic problems.
``The informal sector is serving a purpose, but it is not a satisfying substitute for a more vigorous program of economic reform,'' said a Western economist.
CAIRO put limited reforms in effect last month to win IMF support: liberalizing the pound, imposing a sales tax, overhauling the public sector, and opening new venues for private investment. The IMF, continuing to hold out, said it would not present Egypt's economic reform program to the fund's board until it was fully under way.
Aid given to Egypt by Western and Gulf countries since Iraq's Aug. 2 invasion of Kuwait may allow it to slow the pace of reform, analysts say. The government has always been concerned that rapid economic change may bring domestic upheaval similar to the bread riots of January 1977, when prices were increased too drastically and massive unrest resulted.
In response to Egypt's mustering of Arab opposition to Iraq's aggression, and for deploying nearly 35,000 troops to defend Saudi Arabia against the Iraqi forces, the United States canceled $7 billion in military debt and Gulf states forgave $6.5 billion.
Egypt wants billions more dollars in debt relief, however, from other Western creditors, which will be released when talks with the IMF, spanning nearly three years, are finally completed.
Given the forgiveness of Egypt's debts, if the country follows through on the necessary steps toward reform, economists see the possibility of an improved economic picture in the future.