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Tuesday, 5 February, 2002, 15:32 GMT
Egypt calls for aid
Pyramids and the Sphinx in Giza, Cairo, Egypt
The tourism industry is one of Egypt's biggest foreign currency earners
Egypt is to ask international donors for financial support of $2.5bn to help it plug the gap in the country's accounts.

Income from tourism and shipping income has fallen dramatically in the wake of the 11 September attacks, and in the light of the global economic slowdown.

Egypt and the World Bank are co-chairing a donors' conference in the resort of Sharm el-Sheikh.

They hope the 40 donors, which include the US and countries from the European Union, will offer assistance in soft loans or grants.

"We have suffered a very sharp decline in our major income receipts, particularly tourism, Suez canal revenues, oil revenues," Fayza Abu Naga, minister of state for international co-operation, told the BBC's World Business Report.

"Of course, because of the very high increase in the cost of transportation and the cost of insurance also, this resulted in a very big deficit in our balance of payments," she added.

Tourists wary

Tourism, the country's main foreign currency earner, has been the worst affected sector with losses of almost $3bn.

Hotels in Egyptian resorts and cruise boats plying the Nile which should be booked solid at this time of the year remain half empty.

Earnings from oil exports and Suez Canal tolls have declined as a result of the global economic downturn.

Egypt's low foreign debt and the strategic role it plays in trying to resolve the Middle East conflict mean the international community will probably be inclined to help.

Strings attached?

It is not clear, however, if the new assistance will come with conditions attached.

Many analysts say economic reform has stalled over the past two years; privatisation slowed down and critics say that the government has kept the Egyptian pound at an artificially high rate for too long.

There is a vibrant black market in Egypt where the pound trades at up to 20% below official rates.

"The momentum of reform and economic growth, which was very good in early and mid 1990s, has rather slowed down," Ambassador Ian Boag, head of delegation with the European Commission to Cairo told the BBC's World Business Report.

"The donor community will want to focus not only on immediate problems of the shortfall of foreign exchange, but also the sort of actions that the Egyptian government will take to relaunch their economy and embark on more radical reform," he added.

The BBC's James Whittington
"Egypt needs to plug a big gap in the country's accounts"
See also:

04 Jan 02 | Business
Egypt secures $1.6bn loan
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