Helpdesk

Question
IFIs, economic reform and inclusive growth in Egypt: Why did post 2004 IFI-supported economic reform programmes in Egypt fail to deliver inclusive growth?

Helpdesk response
Key findings: In 2004 Egypt began to implement bold economic reforms, supported by its main donors and the International Finance Institutions (IFIs). The reforms, which included macroeconomic policies; financial sector reform; privatisation and structural reforms in trade, taxes and subsides, contributed to a rapid acceleration of growth, making it one of the Middle East and North Africa's fastest-growing economies. This economic growth, however, did not result in inclusive growth. Unemployment remained high among particular groups, poverty increased from 16.7% to 22%, and there were also disparities between different regions.

A number of reasons are put forward for the reform programmes’ failure to deliver inclusive growth:

• problems within the labour market, particularly persistent unemployment
• cronyism
• subsidies
• lack of democratic space
• insufficient attention to dynamic sectors.

Possible measures for redressing the imbalance include:

• shifting resources out of subsidies
• expand the economic reform programme to include programmes that aimed at translating the recent strong macroeconomic performance into improved living conditions for those below and around the poverty line
• political reform, good governance, and socio-economic development
• the creation of jobs that would absorb Egypt's growing labour force
• address constraints on small businesses.

Full response: http://www.gsdrc.org/docs/open/HD793.pdf