World Bank President James Wolfensohn visited Cairo this week for the first time in six years, as a potential military strike against Iraq cast shadows over an already worrisome economic situation in the region, writes Aziza Sami Immediately before the arrival of World Bank President James Wolfensohn in Cairo this week, the bank's office here issued a statement saying that the losses the Egyptian economy would sustain as a result of the events of 11 September 2001 had been overestimated. The Egyptian government, along with the World Bank and the International Monetary Fund (IMF), the statement said, had predicted that Egypt's current account would sustain a balance of payments deficit of approximately $2 billion in fiscal year 2001-2002. Based on this projection, the government had requested from the World Bank and African Development Bank (ADB) the quick-disbursing of about a $500 million loan each. However, because of the "quicker than expected" recovery in tourism, and a sizable reduction in imports -- by more than $1.5 billion -- the current account deficit came to only $210 million. The government, the World Bank and ADB, consequently, agreed that there was no need -- for the time being -- for quick-disbursing support. World Bank officials say that "analytical work" to pave the way for disbursing the loans will continue, however, so that if the Egyptian economy sustains another external shock, the World Bank and ADB will be ready to move quickly to disburse loans. Deferring acceptance of the loan is in line with the government's cautious policy on external debt, which stands at approximately 27 per cent of GDP. However, in the event of another external shock, such as an attack on Iraq, it might have recourse to such a loan. When Wolfensohn was asked in Cairo whether the World Bank has prepared any contingency packages for Egypt (beyond the aforementioned loans), or the region, in the event of a new regional conflict, he said, "Not at this point in time. To attempt to quantify the impacts of a strike against Iraq on the prices of oil or [the economies of the region] would be ridiculous since all of this would depend on the duration of the conflict, what the different parties would do to each other, and whether there is an outbreak [of conflict] in other parts of the world." Wolfensohn said that in the aftermath of a strike against Iraq, the World Bank would be ready to step in with "reconstruction efforts" similar to those which have taken place in Kosovo, Afghanistan and other countries damaged as a result of conflict. As it now stands, according to World Bank officials, the Bank will be ready for quick disbursal of its joint-loan with the ADB should the government request it, owing to conflict in Iraq or otherwise. However, the disbursal of the World Bank-ADB loan remains contingent on the implementation of further liberalisation in the trade sector, especially customs tariffs, as well as speeding up privatisation in the financial sector (including banks) which, despite repeated assurances by the government, appears to be stalled. Before boarding his plane for a brief stop in Amman on Monday, Wolfensohn met with President Hosni Mubarak. Over the week he also met Prime Minister Atef Ebeid and the cabinet's economic group. On the agendas of these meetings were efforts to reform customs tariffs, laws to attract investments and the obstacles slowing down the bank's delivery of some $700 million, out of a $1 billion package, for a wide range of projects in Egypt. Prime Minister Ebeid and Wolfensohn signed a memorandum of understanding establishing a regional organisation based in Cairo for small and medium enterprises, NAEDF (the North Africa Enterprise Development Facility). 1 The World Bank chief, who has a penchant for addressing civil society and NGOs, in line with the bank's vision of "Comprehensive Development", met several times with the press and business organisations as well as a group gathered by two leading Egyptian think-tanks, the Egyptian Centre for Economic Studies (ECES) and the Egyptian Council for Foreign Relations (ECFA). "The fundamental problem [for the Egyptian economy] lies less in the government's social programmes, than [in how to achieve] growth in the economy," Wolfensohn told the joint ECES- ECFA meeting. "You just don't get improvements [in social and economic conditions] unless you attain growth." He said that the Egyptian economy's current growth rate is three per cent. "But to attain the [government's] social development objectives, a six to seven per cent level of growth needs to be realised. You have this overhead of the scale of the country though, and the number of people [living in] poverty. So it is not easy to turn around and get the machine moving so quickly," Wolfensohn said. The government's policy of "providing 190,000 jobs a year, and the private sector 200,000 jobs, is just not sustainable. You need to develop private- sector generated jobs." Wolfensohn said that the socio-economic policies that the Egyptian government is pursuing are home-grown, rather than imposed by the World Bank or IMF. He alluded to the National Democratic Party's platform announced by President Mubarak in September. "I was frankly very impressed by the speech given by President Mubarak. It is a perfect framework for moving forward. It is a first- rate plan, a ticking off of all issues [dealing with] legal and judicial reform, structural reform, education, technology, trade and gender. All you have to do is do it."
