WITH a population increasing by 1 million every nine months, a massive foreign debt, bloated public sector, and soaring unemployment, Egypt is struggling to carry out economic reforms inspired by the International Monetary Fund and World Bank.Economists applaud the steps Egypt has already taken, but say the government must now start taking more radical ones, including: * Accelerated privatization of the public sector, which represents 70 percent of Egypt's industry. * Increased private investment. * More active trading of shares in Egypt's practically useless capital market. Moreover, work attitudes, management skills, and quality control all need improvement, the economists say. "The policies Egypt has implemented so far were correct, but they are not sufficient. We should move now to the real thing," says Essam Montasser, economics professor at the American University in Cairo. The "real thing" may mean several years of recession, however, before positive economic growth kicks in. If the economy does not improve quickly enough, the public may grow restive. "If the government continues to lag" on introducing reforms, it may wind up having to reverse some policies "because the people are feeling the pain of the rise in prices and other reforms," Dr. Montasser says. As a result of its participation in the Gulf war as part of the allied coalition against Iraq, Egypt enjoys support from the international community. The United States and Gulf countries canceled nearly $14 billion of Egyptian debt. The Paris Club of government creditors then forgave half of Cairo's outstanding debt and pledged a generous $4 billion a year for two years of grants and soft loans. An IMF mission in Cairo in November announced that Egypt was meeting all the specified targets for short-term reform. The nation had liberalized its currency, raised interest rates to market levels, and cut the government deficit. The Egyptian pound is stable and hard currency is in surplus. In May, the IMF finally signed an agreement with Egypt after more than three years of negotiations and an aborted reform program in 1986. This gave Cairo nearly $400 million and the ability to restructure its debt. Signing with the World Bank, which works in conjunction with the IMF on longer-term structural reforms, was a bit more complicated, however. While an agreement was finally signed on Nov. 22, a main reason for the delay was Egypt's delinquency in reducing its public sector. This agreement releases an additional $300 million and helps ensure Egypt's receipt of the Paris Club's $8 billion pledge. The bank was disappointed with Cairo for stalling on appointing a minister to head the new Public Investment Office, responsible for all public-sector companies during the privatization process. The strength and attitude of the appointee would show how serious the country was about reform. There was reportedly rampant internal squabbling over who will head this highly prestigious post. Prime Minister Atef Sidki was finally appointed, a move seen by some as a negative indicator of Egypt's determination. Mr. Sidki, a slow decisionmaker, is too busy with his other responsibilities to be effective in this post, says one Egyptian economist. "The pace of privatization has not occurred as quickly as we wished. This is not for lack of will, but because the economy would be unable to absorb it," concedes Ahmed Al-Dersh, first undersecretary at the Ministry of International Cooperation. Although private investment has increased in the last 10 years, Dr. Al-Dersh explained, entrepreneurs are still unable or unwilling to take on Egypt's public-sector properties. The government is also reluctant to lay off thousands of public-sector employees. Officials have not forgotten the 1977 bread riots, when 12 people were killed after a surprise price-hike. Some economists say the government must enact major political reform before it can achieve needed economic adjustments. The Constitution forbids firing workers and the government tries to find jobs for all young people seeking employment. "In this atmosphere, who can make the necessary changes?" asks one Egyptian economist.