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Egypt Crisis 1984

Egypt Crisis 1984. Mike McDonald Ryan Pendleton Luke Nelson Rocio Mendoza. Egypt Background. 1974-1980: Experienced growth due to availability of foreign exchange. Economy growth at an annual rate of over 9% during this period. 1980’s: slowdown in growth of external earnings

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Egypt Crisis 1984

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  1. Egypt Crisis 1984 Mike McDonald Ryan Pendleton Luke Nelson Rocio Mendoza

  2. Egypt Background • 1974-1980: • Experienced growth due to availability of foreign exchange. • Economy growth at an annual rate of over 9% during this period. • 1980’s: • slowdown in growth of external earnings • Rapid growth generated some inflation • Economy was left with severely misallocated resources and a large deficit • Low interest rates caused inefficient and excessive use of credit.

  3. Leadership and Government • Semi-presidential republic under emergency law rule • President Hosni Mubarak 1981 • Imposition of neoliberal order • Crony-Capitalists • Corrupt bureaucracies • Repressive police force • Polarized wealth and power • Increased labour unrest • President must approve all pieces of legislation and state expenditures before they are enacted.

  4. Banking Structure and Policy • AutocracyRule and a central Bank • The central bank of Egypt was founded in 1961. • They are run on a board separate from government so they are independent • National Democratic Party & President make Policy • The most powerful party to emerge from the Arab Socialist Union since 1962

  5. Egypt’s Crisis • Political Instability • Inflation • Import-Export • Inefficient Investment and Budgeting • Population Growth

  6. Egypt’s Financial Crisis

  7. Political Instability • In the 1980, Egypt switched positions from the Arab and Russian to the Western countries. • Declared peace treaty with Israel • International funding was pulled from Russia and Arab countries and started getting majority of funding from the IMF and United States

  8. Exchange Rate

  9. Inflation • Average annual inflation was 16% • Lower than it should be because of fixed rent and subsidies for other goods • 8-10% of GDP was funded by printing money • Demand-pull inflation • Decline in marginal productivity

  10. Annual Inflation rate

  11. Net Exports • Falling price of oil • Dropped to as low as $10 per barrel in 1986 • Major source of foreign exchange earnings • Started to import 50% of food because they did not use their land efficiently • An increase in Egypt’s exports was necessary to fund their increasing debt and interest payments • Debt-GDP ratio reached almost 100% in 1980s

  12. Real Oil price

  13. GDP

  14. Inefficient Investment and Budgeting • Approximately 1/3 of all investment went to military spending • Even during peace times with Israel • Budget Deficits at 23.5% in 1981 and lowered to 19.9% in 1986 • Agriculture was not growing quick enough

  15. Population Growth • Annual population growth was 2.9% • GDP growth was at 1% annually • Real GDP growth was negative • Most of the increases went to the rich, whereas the poverty level rose severely

  16. Population growth

  17. Resolving the crisis

  18. The Brady Plan • Failure of Baker Plan • Countries were insolvent, not illiquid • Indebted countries engage in buying up their own debt at discount in the secondary market • Operated through IMF and World Bank loans • This reduced the stock of debt burdening these countries

  19. US Assistance to Egypt • Lots of Egyptian debt was forgiven outright by the US and European allies in 1990 and 1991 for assistance in the Gulf war • US also pressured the IMF to give Egypt more favorable terms in 1987, after Cairo security police riots • Reduced the Egyptian debt by half and the annual debt payments by at least a billion of dollars

  20. Works Cited • Jabber, Paul. "Egypt's Crisis, America's Dilemma." Essay. Foreign Affairs, 1986. • Jubilee Debt. Jubilee Debt Campaign. 2012. Jubilee Debt. 16 April 2014 <http://jubileedebt.org.uk/countries/egypt >. • Oweiss, Ibrahim M. "Egypt's Economy: the Pressing Issues." Essay. University of Georgetown, n.d. • Reagan, Ronald. "Remarks Following Meeting." 14 Febuary 1984. University of Texas. 16 April 2014 <http://www.reagan.utexas.edu/archives/speeches/1984/21484b.htm>.

  21. Works Cited • Butler, Rhett A, and Jeremy Hance. n.d.Egypt-DEBT AND RESTRUCTURING. Accessed April 16, 2014. http://www.mongabay.com/history/egypt/egypt-debt_and_restructuring.html. • Greenhouse, Steven. 1991. nytimes.com. May 27. Accessed April 16, 2014. http://www.nytimes.com/1991/05/27/business/half-of-egypt-s-20.2-billion-debt-being-forgiven-by-us-and-allies.html. • National Graduate Institute for Policy Studies. n.d.10. Debt Crisis of the 1980s. Accessed April 16, 2014. http://www.grips.ac.jp/teacher/oono/hp/lecture_F/lec10.htm.

  22. Works Cited • Accounts, W. B. (n.d.). Egypt GDP. Retrieved April 16, 2014, from Index Mundi: http://www.indexmundi.com/facts/egypt/gdp • Data360.org. (n.d.). Population growth egypt graph. Retrieved April 16, 2014, from Data360: http://www.data360.org/temp/dsg205_500_350.jpg • Economics, T. (n.d.). Egypt Inflation rate. Retrieved April 16, 2014, from Trading Economics: http://www.tradingeconomics.com/egypt/inflation-cpi • Historical exchange rates. (n.d.). Retrieved April 16, 2014, from FXtop: http://fxtop.com/en/historical-exchange-rates.php?A=1&C1=EGP&C2=USD&DD1=01&MM1=01&YYYY1=1977&B=1&P=&I=1&DD2=01&MM2=01&YYYY2=1997&btnOK=Go%21

  23. Works Cited • "Arab Republic of Egypt Current Economic Situation and Growth Prospects." The World Bank EGT 4498 (1983): 1-15. The World Bank. Web. 18 Apr. 2014. <http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1999/09/10/000178830_98101901031747/Rendered/PDF/multi_page.pdf>."Biography of Hosni Mubarak." Infoplease. Infoplease, 1998. Web. 17 Apr. 2014. <http://www.infoplease.com/biography/var/hosnimubarak.html>.Marshall, Andrew G. "Egypt Under Empire, Part 3: From Nasser to Mubarak I The Hampton Institute." Egypt Under Empire, Part 3: From Nasser to Mubarak I The Hampton Institute. The Hampton Institute, 24 July 2013. Web. 18 Apr. 2014. <http://www.hamptoninstitution.org/egyptunderempirepartthree.html#.U1bb6v2vtSU>."National Democratic Party." Egyptian Revolution  . N.p., n.d. Web. 16 Apr. 2014. <http://egyptward1.weebly.com/national-democratic-party.html>."Opinion: Is 1984 Happening in 2014?" Israel National News. News from America, 29 Jan. 2014. Web. 10 Apr. 2014. <http://www.israelnationalnews.com/News/News.aspx/176868#.U1bOx_2vtSU>.

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