Quick money and more reform

$10.3 billion was pledged by donors at Sharm El-Sheikh, while the Egyptian government has promised a comprehensive series of reforms. Khaled Dawoud and Soha Abdelaty, in the South Sinai resort town, report
The 34 nations and funding organisations taking part in the 5-6 February Consultative Group for Egypt (CG) meeting pledged $2.1 billion in funds for immediate disbursement as part of a $10.3 billion overall package agreed for the period 2002-2004. "A credible microeconomic framework," though, has yet to be put in place, according to the final statement issued by the Egyptian government and the World Bank, joint organisers of the meeting held in the South Sinai resort town of Sharm El-Sheikh.
This is not, however, a condition imposed by donors, insisted the head of the Egyptian delegation, Minister of State for Foreign Affairs and International Cooperation Fayza Abul-Naga, but an integral part of Egyptian government policy.
The pledges reflect the strength of donor support for Egyptian government policy as well as a recognition of its vital regional role, argued Abul-Naga.
"You live in a tough neighbourhood and the efforts of Egypt to bring peace in the region will definitely have an immediate impact on attracting investors," said Jean- Louis Sarbib, the World Bank's vice president for the Middle East and North Africa.
While the $2.1 billion will directly fund over 100 projects proposed by the government to help economic recovery, no breakdown of donor contributions was available at the closing news conference. That, said Abul- Naga, would be released by the World Bank at a later date. The IMF, the African Development Bank, and the US are understood to be major donors, while European Union (EU) members, Canada, Japan and Arab and Islamic financial institutions have also made significant pledges.
Egyptian officials had been confident that their requests would be met before the meeting was convened. "The tentative figure so far ranges between $2.2 to $3 billion," Prime Minister Atef Ebeid told reporters after inaugurating the conference.
The picture drawn by Ebeid in his opening ceremony speech on Tuesday was far from rosy. The sector hit hardest by the 11 September attacks was tourism: revenues for 2002 are expected to be down by 48 per cent from last year, with disastrous consequences for a balance of payment deficit the government estimates at $2 billion. Foreign direct investment is also expected to decline by $0.7 billion, while unemployment is anticipated to rise by 387,000, two per cent of the total labour force. The 2002-3 fiscal year, according to government figures, will see GDP growth of between 4 and 4.5 per cent, down from the 5.7 per cent last year.
If Ebeid's predictions were bleak, the IMF figures were worse. Economic growth in 2000 to 2001 was down to 3 to 3.5 per cent, and would continue to decline to two per cent in the coming year. Yet according to Jean-Louis Sarbib, Vice-president of the World Bank, the figures did not constitute an econimc crisis but " a slowdown that is being managed."
"The donors and friends of Egypt are here to try and make sure that the (reform) program that the government is putting in place has the support of the international community and is likely to be successful," he told reporters.
Ebeid and other officials expressed similar confidence, committing Egypt to a wide-ranging economic reform programme agreed with major donors that includes a commitment to job creation, rural development and export promotion
Earlier in the conference, two major points of controversy emerged, over the exchange rate and the speed of disbursal. Ebeid acknowledged that disbursement of funds has been a problem in the past.
"Not all the money that has been available has been used," he said. This did not mean, though, that undisbursed money from past years would be re-cycled. The money pledged at this year's conference was "fresh and new ," he told reporters.
Finance Minister Medhat Hassanein revealed that ways of speeding up the disbursement of money were discussed with donors in Sharm El-Sheikh. "But this requires that the conditions set by donor nations should be favourable and not obstructive," he said.
On the matter of exchange policy the IMF insisted that "further progress is needed to improve the functioning of the exchange rate system." Egyptian officials, however, were keen to dampen rumours that the donors had come to pressure the government to further devalue the local currency. The remarks by the delegations only "supported what came in the Egyptian policy paper, which indicated an obligation on its behalf to follow a flexible exchange rate," said Abul-Naga, while Ebeid denied claims that the government was planning a further devaluation of the Egyptian pound. These were, he said, "rumours circulated by speculators who are seeking to negatively influence the market."
Hassanein was optimistic that signs of a recovery in tourism and decreasing demand for the dollar after the current hajj season ends would lessen downward pressure on the pound.
"We hope that within the coming few weeks, the pressure for foreign currency will be resolved... the influx of foreign currency based on this meeting with donors is a sign that the exchange rate is stabilising."
Ebeid announced that the government would embark upon five broad programmes to which additional funding will be directed. These will target population growth rates, job creation schemes in the small business sector, micro credit schemes for new graduates, upgrading vocational training and environmental protection.
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