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An overview of Structural Imbalances in Egypt

Chahir Zaki
p. 99-124


The Egyptian economy has been negatively affected by the political instability that the country has witnessed since 2011. Indeed, this instability showed the extent to which the Egyptian economy suffers from several structural imbalances that first amplified the negative effects of the revolution and then delayed its recovery. This paper analyzes both internal and external structural imbalances that characterize the Egyptian economy and presents a roadmap for future reforms. Egypt is suffering from three primary levels of internal imbalance: the sectoral level (a declining industrial sector with a low level of competitiveness), the fiscal level (between revenues and spending, current vs. productive spending), and the monetary level (non-transparent monetary policy). Externally, two structural imbalances can be identified, namely a high level of imported intermediate inputs leading to a chronic trade deficit and FDI concentrated in low-value-added. It is argued that the main reasons for such imbalances are inefficient political and economic institutions.

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Internal Imbalances
Sectoral Imbalances
Fiscal Imbalances
Monetary Imbalances
External Imbalances
Export and Import Structures
FDI Drawbacks
A Political Economy Explanation
Conclusion and Future Reforms

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In early 1990, Egypt implemented an economic reform and structural adjustment program with the World Bank and International Monetary Fund. This program tried to rectify macroeconomic imbalances by enhancing the role of the market and privatizing state-owned firms. Starting in 2004, the Egyptian government launched a second wave of reforms on various fronts. These reforms tackled several aspects of the economy, including promoting investment by improving the business environment and enhancing trade performance through trade liberalization and reducing red tape. This resulted in high levels of GDP growth between 2005 and 2008 (reaching 7.2% in FY2007/08).

However, the Egyptian economy was subject to two shocks that had negative implications for the economy. First, the financial crisis caused growth to fall to 4.7% in FY2008/09. Second, the popular uprising in January 2011 caused real GDP growth to fall from 5.1% in FY10 to 1.8% in FY11. It is worth noting that the quarter ...

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Chahir Zaki, « An overview of Structural Imbalances in Egypt », Égypte/Monde arabe,Troisième série, 16 | 2017, mis en ligne le 15 octobre 2019, consulté le 17 octobre 2019. URL : ; DOI : 10.4000/ema.3727

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Chahir Zaki

Chahir Zaki is an Associate Professor and Director of the French Section at the Faculty of Economics and Political Science, Cairo University and Economic Research Forum.

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