Balance Of Payment And Exchange Rate In Egypt Economics Essay

Is a country mainly in North Africa, with the Sinai Peninsula forming a land bridge in Southwest Asia. Thereby, Egypt is a transcontinental country, and is considered to be a major power in North Africa, Mediterranean Region, African continent, Nile Basin, Islamic World and the Red Sea. Covering an area of about 1,010,000 square kilometers (390,000 sq mi), Egypt is bordered by the Mediterranean Sea to the north, the Gaza Strip and Israel to the northeast, the Red Sea to the east, Sudan to the south and Libya to the west.

Egypt is famous for its ancient civilization and some of the world’s most famous monuments, including the Giza pyramid complex and its Great Sphinx. The southern city of Luxor contains many ancient artifacts, such as the Karnack Temple and the Valley of the Kings. Egypt is widely regarded as an important political and cultural nation of the Middle East.

Part 1

Balance of payment and Exchange Rate in Egypt:

Balance of payments transactions are usually tabulated under two broad categories, current account and capital account. Current account includes visible (merchandise) trade as well as invisible items, such as tourism, shipping, and profits and other moneys earned overseas.

Here is the results of studying an annual report for balance of payment and exchange rate in Egypt :

The Year

Balance of Payment (BOP)

Exchange Rate

The Comment

2005

5.5 billion

1$ = Selling price:1$ =5.77 Egyptian pound

Purchasing price:1$=5.23 Egyptian pound

That’s mean that the export rate will be greater than the import rate. So, the income of Egypt in this year is in good situation and it was the best situation in the last 5 years

2006

2.7 billion

1$ = Selling price:1$ =4.34 Egyptian pound

Purchasing price:1$=5.99 Egyptian pound

That’s mean that the export rate less than the import rate. So, the income of Egypt in this year is decrease and it was the worst situation in the last 5 years.

2007

3.1 billion

1$ = Selling price:1$ =4.76 Egyptian pound

Purchasing price:1$= 5.00 Egyptian pound

That’s mean that the export rate more than the import rate. So, the income of Egypt in this year is start increase again

2008

4.1 billion

1$ = Selling price:1$ =5.3 Egyptian pound

Purchasing price:1$= 4.33 Egyptian pound

That’s mean that the export rate more than the import rate. So, the income of Egypt in this year is still increasing

2009

5.38 billion

Selling price:1$ =5.5 Egyptian pound

Purchasing price:1$=5.23 Egyptian pound

That’s mean that the export rate will be greater than the import rate. So, the income of Egypt in this year is increased

Part 2:

Economic reform in Egypt

In The Political Economy of Reform in Egypt: Understanding the Role of Institutions, Carnegie Middle East Center’s “Sufyan Alissa” finds that economic reform, considered a priority by the Egyptian government, has not been fully effective for three reasons: it lacks public support, Egypt has failed to foster a competitive business environment, and the lack of dynamic and transparent institutions. 

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Alissa argues that Egypt lacks the institutional capacity to implement better-coordinated reform programs that address its socioeconomic realities, including widespread poverty and unemployment, high inflation, and a soaring public debt. Reform is needed to improve the efficiency of Egypt’s bureaucracy, increase the accountability and transparency of politicians, and widen political participation for Egyptian citizens.

Key Findings:

• Egypt has failed to create a healthy and competitive environment for business development. Despite the passage of many laws to organize the business environment, the government has not developed an effective enforcement process for these new laws, and little progress has been made in the fight against corruption.

• Economic reform lacks popular support in Egypt as reforms are perceived to cause more harm than good as previous reforms have consistently failed to address socioeconomic problems. Furthermore, future reforms are predicted to increase the gap between the Egyptian rich and poor before the masses can feel the positive effects.

• The majority of the private sector and civil society is excluded from the debate over Egypt’s economic reform strategy. Public participation is crucial for advancing civil society institutions and promoting an effective role in designing and implementing comprehensive economic reform.

“Given the nature of the Egyptian state and the main actors in the market and civil society, developing the necessary institutions and, most important, making them function properly within a short period of time seems unrealistic. Hence, Egypt should make the choice: Either start developing these institutions soon or lag behind. Building these institutions is the responsibility not only of the Egyptian state but also of the private sector and civil society,” contends Alissa.

Part 3:

Monetary Policy in Egypt:

Egypt’s Monetary Policy Objective:

Law No. 88 of 2003 of the “Central Bank, Banking Sector and Monetary System” entrusts the Central Bank of Egypt (CBE) with the formulation and implementation of monetary policy, with price stability being the primary and overriding objective. The CBE is committed to achieving, over the medium term, low rates of inflation which it believes are essential for maintaining confidence and for sustaining high rates of investment and economic growth. The Government’s commitment to fiscal discipline is important to achieve this objective.

Fiscal Policy in Egypt:

Fiscal policy is the use of Egyptian government spending and taxation to influence the economy. When Egyptian government decides on the goods and services it purchases, the transfer payments it distributes, or the taxes it collects, it is engaging in fiscal policy. The primary Egyptian economic impact of any change in the government budget is felt by particular groups-a tax cut for families with children, for example, raises their disposable income. Discussions of fiscal policy, however, generally focus on the effect of changes in the government budget on the overall economy. Although changes in taxes or spending that are “revenue neutral” may be construed as fiscal policy-and may affect the aggregate level of output by changing the incentives that firms or individuals face-the term “fiscal policy” is usually used to describe the effect on the aggregate economy of the overall levels of spending and taxation, and more particularly, the gap between them.

Conclusion:

Egyptian economy is one of the most attractive economies in the world that is because it faced mane ups and downs, also the large number of population in Egypt affects the economy in a very observing way. That’s why the economics ministry in Egypt must take care for its behavior.