If anything in Egypt is worth learning from the global financial crisis, it is that the current structure of the Egyptian economy and the mindset sustaining it needs fundamental change. …
Since the 1970s, Egypt’s economy has relied on four main sources of foreign exchange, namely oil, tourism, workers’ remittances and the Suez Canal. … All of these sources are more influenced by demand than supply and are heavily prone to violent fluctuations resulting from international developments upon which Egypt has obviously no control. More importantly, they are closely interlinked; a change in one factor very likely elicits similar changes in the other sources and these changes work in the same direction, hence exacerbating the cash shortage crisis.
Hence, part of Egypt’s vulnerability to the current financial crisis stems from the shortcomings of this unstable economic structure. Egypt’s banking sector is immune to the turbulences sweeping Wall Street and its mortgage market is too small to create trouble. However, Egypt’s four golden eggs will most likely decline following a global recession due to the anticipated decline in volumes of international trade and plummeting oil prices. …
The recent reformation of the structure of taxation is probably the only exception to that rentier mentality, as it increased the state’s domestic sources of revenue. … That’s not sufficient, however. Unless more attention is given to productive sectors, Egypt will remain vulnerable to the unpredictable fluctuations of international markets. Access the full article>>
