What Lies behind Egypt’s Problems? How do They Affect Others?

Based on information from the CIA World Fact Book, Egypt was already significantly overspending its revenue in 2009 (the last year available), with revenues of $46.82 billion and expenditures of $64.19 billion. For 2010, the Factbook reports government debt amounting to 80.5% of GDP, putting its debt level far above that of most other African and Arab nations.

If Egypt’s oil production is down, follow-on industries like refining and chemical products are likely down as well, making it difficult to increase revenues from these sources, or to obtain additional taxes related to the spending of workers in these industries. The Suez Canal is one of Egypt’s sources of revenues, but with world oil exports down, revenues from it are likely dropping as well.

Cutbacks in oil production and in Suez Canal transport can be expected to exacerbate unemployment problems. The Egyptian unemployment rate was listed at 9.7% in 2010 by the CIA World Factbook.

Egypt has a history of a fairly egalitarian approach to distribution of income. In 2001, the CIA Factbook lists its GINI coefficient as 34.4%, which is near that of the United Kingdom, and much better than, say, that of the US. But in recent years, the CIA Factbook says

Cairo from 2004 to 2008 aggressively pursued economic reforms to attract foreign investment and facilitate GDP growth.

These economic reforms likely raised the income of some people, but not of everyone, creating a wider gap between the rich and poor. This may lie behind reports of concerns by the poor that they are falling farther behind economically. With the county’s history of a more even income distribution and the recent rise in food prices, this rising income inequality may be becoming more of an issue.

Need for Food Imports

Egypt’s population has been growing rapidly (estimated at 2% per year by the CIA World Fact Book – about 3.0 children per woman), but the population is concentrated in a narrow strip along the Nile River. (Graph from Population Databrowser.)

Figure 3. Egypt's population growth since 1950

As population grows, the amount of land needed for housing and businesses rises, and the amount of land for agriculture falls. So Egypt can produce less of its own food, as time goes on.

Egypt is reported to be the world’s largest importer of wheat. In 2010, the oil minister stated that Egypt imports 40% of its food, and 60% of its wheat. The problem this year is that world wheat production is down (at least in part due to weather problems in Russia) so world exports are down:

Figure 4. World wheat production and world wheat exports