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How is redistribution supposed to solve a problem with too much imports? To do that more foreign currency will be needed. Considering how important tourism is to Egypt, the tourism industry needs to be helped. A government based on political Islam is unlikely to be compatible with more western tourists.
by oliver on Sun Jul 14th, 2013 at 05:35:37 PM EST
[ Parent ]
Redistribution only directly addresses import dependence if the propensity to import lower down the income ladder is substantially lower than the propensity to import further up the income ladder.

In low income food surplus nations, that is reasonably common, but I don't know whether its the case for Egypt.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Jul 15th, 2013 at 01:01:50 AM EST
[ Parent ]
This is odd. The poor spend relatively more on food. If anything redistribution to the poor should mean more imports of food.
You might argue that the main problem is not food but fuel and that the poor have no cars and hence use less fuel. But then simply cutting subsidies or raising a tax on fuel would solve the problem.
by oliver on Mon Jul 15th, 2013 at 06:29:40 AM EST
[ Parent ]
If your CA deficit is driven by luxury imports (BMWs, TVs, etc.), then redistribution from rich to poor will drive down your CA deficit.

If your CA deficit is driven by food and fuel, then redistribution from rich to poor will drive up your CA deficit. OTOH, if your CA deficit is driven by food and fuel, then failure to redistribute from rich to poor is liable to get you a new constitution.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 15th, 2013 at 07:12:48 AM EST
[ Parent ]
Yes, that is why in food surplus nations, where the local poor primarily eat domestically produced food, it seems highly unlikely that redistribution would do anything other than improve the Current Accounts balance, since the propensity to import of the wealth is clearly greater than the propensity to import of the poor ...

... while with food deficit countries like Egypt, its not so cut and dried, and even if the balance is in the positive, the impact will still be substantially muted by the netting out of the increase food consumption of the poor.

You'd at the very least want to accompany it with programs to increase in domestic production of foods that are aspirational consumption items by the poor.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Tue Jul 23rd, 2013 at 12:43:35 AM EST
[ Parent ]
Redistribution is intended to solve the problem of food  scarcity driven support for new revolutions. But how this impacts the trade deficit is a good point. Checking with CIA, the largest group of imports is machinery and equipment followed by foodstuffs. Among the largest import partners feature China, US and Germany with 25% of Egypt's imports. This is of course far from all BMW's and ipods, and includes supplies for industry but there should be some room for decrease of not so essential goods.

If anyone has a better breakdown of Egyptian imports it would be interesting.

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by A swedish kind of death on Wed Jul 17th, 2013 at 03:42:26 PM EST
[ Parent ]
Egypt Trade, Exports and Imports plus recent charts

More insight in economic developments past decades ...

Economic Reform In Egypt In A Changing Global Economy - 1997 [pdf]

By the early 1980s, the Egyptian economy already largely depended on oil export revenues, Suez Canal dues and remittances from Egyptians working abroad to pay for imports of food and capital goods (see Table 2). Substantial investments were meanwhile made in highly capital-intensive industries, which obviously did not ease unemployment. The fall in oil prices in the mid- 1980s cut oil revenues and remittances and worked its way through the economy.

Egypt's participation on the Western side in the Gulf War in 1990-91 led to vast transfers of funds from Western and Arab donors and the promise of debt relief. The latter was conditional on the IMF's certification that Egypt had sound policies leading towards macroeconomic stabilisation. In turn, the IMF required Egypt to adopt a comprehensive economic and structural adjustment programme which, irrespective of the government's enthusiasm, led to economic progress. The Paris Club agreement has been part of Egypt's international economic relations since 1991.

Egypt's balance of payments on current account (Table 2) brings out its structural trade deficit, which averaged $6.2 billion a year from 1990-95 and shows no sign of falling. This is partly made up for by income from invisible transactions, mainly workers' remittances, tourism receipts and Suez Canal dues. In 1990-94, workers' remittances averaged $4.8 billion a year and receipts from tourism $1.7 billion.

In a typical year, Egypt's exports of petroleum and gas, tourism, official transfers, Suez Canal dues and workers' remittances add up to between a fifth and a quarter of GNP. These receipts are a sort of economic rent, deriving from Egypt's geological, historical and strategic situation. They are only partly influenced by domestic economic policies and tend to be volatile.

The policy of the European Community (later the European Union) towards Egypt has been typical of its policy towards non-member Mediterranean states. A trade agreement has given preferential treatment to Egypt's exports, while financial protocols have helped finance improvement in the country's supply capacity. The co-operation agreement of January 1977, which was updated as the European Community grew bigger, provides for broad co-operation and, being of indefinite duration, established a stable contractual framework for long-term programming decisions. Four successive financial protocols to the agreement covered the period 1977-96.

by Oui on Thu Jul 18th, 2013 at 04:40:56 AM EST
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