No. E 184
                                                         RESTRICTED



                                                    67106
                                I
                                    se within the Bank




        -""~~'r>.TIONAL             UCTION AND DEVELOPMENT




                                     UATION




          I


     : ono I ic Depart.ment
     !repa}ed by: F J G. B
                   A.!
                     !
                         Krui
.1
             i   j,
                                           ,
                 : ;!


    ~xc~Jg~ Rates
     i   I   !   Ii'


$1                           LE .348
LE 1                          $2.87
LE 1 ~illiQn
     I  I    I
                         -    $2,871,560
     i
                 i:
         I   •




             I   i




                 !   I




             I   I'
             I



             I
                                 TABLE OF CONTENTS


                                                                                  Page
         Egypt: Basic Statistics

         Summary and Conclusions                                                i - ii
                                     "' • •
                                              -e
                                                        ".   •    •    •   •
I,       Introduction
                          "' ~
                                   • • • •  "e
                                                • •          • ..      •   •            1

II.      Long Term Problems of the Egyptian Economy          • •       • •              3
             Overpopulation •      .
                                   .. • ..     • e
                                              "~
                                                             • •       •   ..
                                                                                   ""

                                                                                        3
             Inequalities of Income Distribution .           • •       •   •            4
             Excessive Dependence on Cotton    • •           •    • •      •            5
III.    Present Economic Position and Deve~opment Prospects                •            6
        A. Production , • • •           .. • • • •        •       t
                                                                           •            6
               Agriculture • • • • • • •            e  •                   •            6
               Industries, Power and Transport • • • •                     •      10

         B. Internal Finq:} ce • • • .. .. • •               •    •    • •        14
               Public Finance • • • . • • ,                  t
                                                                       •   •      14
                                             .                    ..
               Money, Banking and Inyestment
         C. External Finance " • • •
                                                   -         e         •   •      19
                                                                                .....-""-;.,..~"'~
                                                                                  23
                                              t"
                                                •  t         •    •    •   •
               Foreign Trade e, e"      t
                                         • e" • e            ..   •        ,      23
               Balance of Payments            • •                      . ,         25
                                     " " •
               Foreign Exchange Holdings   • .. •            • • •         e      27
IV.      Egypt's Capacity to Ser~~ce Foreign Loans           •    •        •       28
                                        .'
                                                                       e
            Existing External Debt       " e' •              •    •    •   •      28
            Overall Debt Servicing Capacity    • •           •         •          28
                                                                                  29___
                                                   ..
                                                                           t

            Dollar Debt ServiCing Capacity                   • •       .   •
                                                                                 --"
                                                        t"




MAPs:    Distribution of Egypt's Natural Resources - follOldng Page S
         The Nile Basip ~ Location of Projects           II     II
                                                                    9

CHARTS

STATISTICAL APPENDIX
                                           EGYPT
                                      B"..SIC
                                      "  ..   STI,TrSTICS
Tot.al Area                                                        386,000 sq. miles
  ..       f'
                                                                  (247 million acres)
       of which cultivable                                         7.5 - 10 million acres
       of 19hich eu! ti va ted                                     6 million acres
Population (1950 estimate)                                         20 million
       Ra te of increase                                           1.5;; per annum
t,Iational Income (1950 private estimate)              about I.E 700 million (1;,1,960 ruillion;
                                                             1£ 35 per capita (·;;,98)

                                           1935/39 average 1940/44 average 1946/50 averr'
Agricultural Production                                    (in thousands of .Gletric tonsj

       Cotton                                 410                       270                              348
       Cereals (except rice)                3,545                     3,748                       3,119
       Rice                                   435                       397                         760
 ,
Currency
       Unit                                                      Egyptian pound (LE              =100 piasterr
       Par Value                                                 IE 1 -= >2.87
Prices
       YihQlesale prices                                         1939 - 100
                                                                 1950 • 376
       Cost of L1 ving                                           1939 • 100
                                                                 1950 • 306
                                                                 194~,49 .~.               1?~9/50
Government Budget (closed accounts)                                   ~n m~.!.h.ons         .i.u.;,)

       Revenues                                                   142.5                         158.5
       £Xpenditures                                               157~1                         16S\.0
                            Deficit                         -      15 .. 2                  .... 10,,5

Foreign Trade
    Imports
                                                     -
                                                     1948
                                                     162..$
                                                                              1949
                                                                    (in millions LE) -
                                                                                                  1950
                                                                         158.3       221,7
    Bxports                                           132... 6           1)8.7       184.. 8
                ~cess   of Imports                     29.9                       19.. 6            36..9
Balance of Payments
    Payments    '                                    20&.9                    212 .. 0            282 .. 3
    Receipts                                         194 .. 1                 216.. 9             268 .. 3
                        Balance                     - 12.... 2               ;.    4.. 9        - 11",0
                           SUM.v!ARY AND CONCLUSIONS
                            •   1       ,




.
           During the last few years ~grpt has benefited from unusually high
    prices for cotton, the country's main export item. Gold and dol~ar ho~d­
    ings have increased and a high level of imports has been maintained. Some
    of these imports consisted of capital goods which ~Jermi tted the re-equipment
    of industries and a certain amount of industrial expansion.
            No real start has been made yet on the .large-scale development
    projects which would .lead to the solution of some of ~gypt's long term
    problems, the mJst serious of which are overpopulation, the glaring in-
    equali ties of income distribution and excessive deiJendence on one crop.
           The expansion of agriculture, the basis of the country's economy,
    bears the greatest promise for alleviating at least the first tvT:) of the
    above named ills. The cultivated area can be increased only if more
    irrigation water is provided through a further harnessing of the Nile.
    Thus, the Nile Development Scheme including its t,yadi El Rayan cOfilponent
    deserves highest priority.
           Industrial development is almo:;t equally important insofar as new
    industries can be expected to absorb some of the rural population surplus
    and to contribute to a diversification of the 19yptian economy.
            The raising of local currency for development in the public sector
    may present difficulties. Reserves accumulated from budget sU!")luses in
    the past have been almost exhansted by a certa.in amount of Government
    investment (five year plan), and by current deficits ca'.lsed by increased
    expenditure for milita.ry purposes and for social welfare. Before the
    recent reform of the tax system will yield increased revenues further
    defici ts in the ordinary budget may arise, and in order to cover them the
    Government may have to resort to intenl<u loans. Government borroHing in
    this case would presumably take the form ot additional Treasury Bills
    placed mainly with the newly organized Central Bank. This would add to
    the already existing inflationary pressures. In spite of price controls
    and subsidies" the cost at liv1.ng increased by 6% during 1950 (slightly
    more than in the U.S.) and a moderat~ increase continued in trle first five
    months of 1951.
           Private investment directed mainly into real estate and partly into
    industries has aparently reached fairly large proportions during the last
    few years and is likely to continue. A large proportion of development
    projects, especially in the all important field of irrigation, will have
    to be carried out from public funds. If conditions on the capital market
    improve the Government may succeed in raising some long term loans for the
    f~nancing of these projects Q


           In contrast to the difficulties involved in the internal financing
    of development, the availabi~ity of foreign exchange is much less of a
    problem. Egypt's present external financial position can be considered
                              -ii-

strang. In spite of balance of pa~~ents deficits, the country has
foreign exchange holdings equivalent to over a billion dollars. Some of
this reserve may be used to cover balanCe of payments deficits, which
may continue for several years on a decreasing scale •

      . The estimate of Egypt's creditvJOrthiness is 1)ased on the apparently
favorable outlook for balancing trade. !;,ecent deficits were due to
temporary causes, such as the war-time backlog in imports of equipment
and the necessity to maintain exceptionally high imports of consumer goods
to combat the inflationary effects of hi~h cotton prices. The anticipated
decrease in the value of cotton exports will be largely offset by a decree
of unessential imports because of their strong dependence an income from
cotton. An expansion of the crop area resulting fro'11 the proposed"'ile
irrigation program and industrial eXj)ansion, especially of fertHizers anr'
                            1e volume of exports and reduce imports. Trans-
textiles, 1Jvill increase t 1
actions on invisible account will presumably continue to yield surpluses,
and dollar receipts from the Suez Canal traffic are expected to be more
than sufficient to cover dollar trade deficits and financial transfers.

        Thus if development is carried out effectively, a balance of
paymen ts surplus ough t to be ob tained wi thin a few years. As Egypt has
no public foreign debt and goverThnent-guaranteed and other private foreign
debts are small, the expected balance of payments surplus Twuld be avail-
able for the serviCing of new foreign loans. It may be reasonably
assumed that initially Sgypt could devote from 2 to 4; of the expected
total foreign exc'lange receipts for the serviCing of foreign loans for
development. This would include also the ability to service dollar loans
of a moderate amount.
                            I   INTRODUCTION


       Bebind the apparently unmoving facade of the Egyptian way of life,
deep changes have taken place in our. times.
       The. s~cond part ot the Nineteenth Century saw an opening up of the
country by new transportation,tacilities, the birth of industrial capital-
ism, the beginning of large scale cotton growing .. st1mulated by the
effects of the American CiVil War .. and the appearance of Egypt in the
world trade markets.
       !.be beginning of this century witnessed an intensification of
Egypt's agricultural produetion by a change from the once a year flood
irrigation to the a1.1 year rO\l.'1d system of irrigation through storage
and canals.
        Both World 1iars stimulated industrii3.1 development and, by extra-
ordinar,y receipts and accumulation offore1gn exchange holdings, changed
Egypt's position from that of a debtor to that of a creditor country.
       During the last years, unusually high prices for £gyptian cotton
have strengthened .the . country' smonetary reserves and have allowed the
maintenance of a high level of imports.
       The present period of "fatll years in Egypt's economy provides an
opportunity to develop ina more permanent way the cow1trf t s productive
potential. This becomes even more important since Egypt's long·term
prospects are heavily-clouded by l;Iuch problems as overpopulation, glaring
inequalities of income distrib\ltion and excessive dependence on one crop.
Development projects should be evaluated by the extent to which they help
to solve these basic economic problemE;l.                            .
       There is no deve~opment program in Egypt. Individual projects
studied by the various ministries and submitted to the Parliament h8.ve not
followed an· overall plan until now. A variety of projects, some of which
are directly related to the production capacity of the country, have been
listed by the Government and preliminary cost estimates have been made
totalling LE 230 million (of which LE 73 million in foreign a'Cchange).
Several of these projects, including, water-storage, industrial development
and transportation, totalling LE 98.5 million ($280 million) were discussed
with the Bank Nission for possible IBRD financing.
       A large part of these projects, especially in the vital field of
water.storage for flood prevention and irrigation, must be carried out by
the Government. As the Government-operated dams on the Nile control
practically the entire water supplyo£ the country, the Government can
determine the choice of crops in relation to the availability of water and
can enforce its decision by regulating the discharge into the canals.
                                   -2-

       other than water control, the role of the public sector in the
Egyptian economy is not excessive. There is no strong tendeney to in...
crease public ownership of the mean~ of production. State domains are
gradually parcelled out to private owners. In the industrial sphere
public ownership is limited to one petroleum refinery and a few power
stations.
       Qenerally speaking Egypt's ruling circles are aware of the countr.r's
social and economic weaknesses and of the necessity to start speedy remedi-
al action. But efforts to this effect so far have been scattered and the
selection of some of the development priori ties can be disputed. This is
illustrated by government budgets for the last three years, "mieh include
increas~ng allocations for social welfare, health and education while com-
paratively few budgetary or extra-budgetar,y funds are available for economic
development. It is feared that social security payments contributed at
present entirely from the buc;1get and therefore very limited, will patch up
rather than cure Egypt's social il:j..s. Improveo. health se:rvi.ce might de-
crease IIlorta4ty, but at the same time it lIligt1.t accelerate the rate of
population increase before additional employment can be provided. Similar-
ly, a broader program of edUcation, e.speciallyas it emphasizes general
education l'atlle:r than vocational training, IIlay increase the number of un-
employed or ~der-emplwed white collar wo;rl<ers. Thus, the admirable
purpose of improving SQcial conditions may be de!eated'if all the above
programs are not pr~ceded, or at least paralleled by the increase ot
E~t's production.
             n   LONG TERM PROBLE£1S. QFTHP; EGYPTIAN ECONOMY
                                        •



                            Overpopulati9B

        As over 96% of Egypt's total area of 386 ~lousand square miles
consists of deserts, practically all of the 20 million Egyptians live in
the narrow strip of cultivable land along the Nile and its Delta or in
the few existing oases. The density of population in the inhabitable
part of Egypt amounts to over 1,400 persons per square mile, which is
more than twice as high as the density in Japan or in industrialized
countries of Western Europe. This phenomenon is comparatively recent:
as a result of Egypt's very high birth rate, the popul •.ttion has nearly
doubled during 'Ule last fifty years and continues to increase at the
                 ,%
:rate of about 1.• per annum·. Projecting this rate of increase into
the future, we arrive at an estimate of 31 million people in 1980.
        The area under crops has not increased at the same pace. Data
for the last tweuty years show that while in 1929 there were a~out 1.6
persons per acre of cropped land, this proportion rose to 1.8 in 1939
and 2.1 in 1949. The deteriorating ratio of agricultural land to people
was counter-balanced to a certain extent by an increase in yields caused
b,y improved methods of cultivation, extensive irrigation a~d more intensive
application of fertilizers. It appears, however, that the pos~ibilities
of a further increase of ~~elds are approaching their natural limits.
Yields per acre of £gyptian cotton and cereals are already among the high~
est in the world.
       Only a small share of the burden of supporting the increasing
population has been carried by the development of ~~dustries. According
to the available estimates, the number of industrial enterprises bas
doubled during the last twenty years and the number of industrial workers
has increased during the same period from some 260,,000 to about 500)000
persons. This would indicate that the total number of people depending
on industries for their 1ivelihood (workers and their families) increased
on the average by some SO-OO thousand per annum, compared 1fi th a total
population increase of about 300 thousand persons annually.
       As there are no prospeets at present of remedying the problem
of population pressure either by a voluntary slowing down of the rate
of increase or by emigration, the only remaining solution is to increase
the output of agriculture, mining and industries. Otherwise, the standard
of living will tend to decline. Increased mining and industrial produc-
tion are important development factors, but in the foreseeable future
they will continue to affect only a small segment of the Egyptian; pre...
dominantly agricultural" economy. An increase of agricultural production
remains, therefore, as the most promising means of reducing the gap between
                                   ·.-4-


Egyplit s production and population or, at leas.t, of preventing i t~
widening.

                  Inesualities   ~f,   Inc0nts   Disi~ribution

       Great discrepancies in income levels are neither new nor excep-·
tic:mal phenomena in the Middle East, but conditions in Egypt are partie...
ularly striking. The most reliable estimates (for 1946) indicate a
national income eqvivalent to about $90 par head,. but for at least one
half of the people, including most of the rural population, the average
was probably nearer to $40 per yea,r. The situation can be illustrated
further by the f~ct that 21 thousand people own about half of all the
agricultural land and cattle, tnat about 10% of bank depositors hold
more than half of all deposits, that some lO,OOO people own more than
half of all industrial stocks and some ~8,OOo people own more than half
of all the urban real estate.
       The. extreme poverty of the ~gyptian masses, apart from the latent
social and political dangers involved and from the fact that it prevents
the development of an internal market has, obviously, also other untavor-
able repercussions on the countrytseconomy. It i:;; reflected in illiter....
acy, malnutrition and very low health standards, which in turn hamper
training and labor efficiency.
       The developments of the last years seemt,o have had li ttl/? effect
on the existing pattern of income distribution. The increased cost of
living appears to have caused a certaindecllne in real. wages of agri-
cultural and industrial labor. Fixed income earners suffered for the
same reason although government employees, l-lho received a higher cost
of liVing bonus, were not affect~d.
       The Govermnent aims at correcting existing conditions somewhat
by increased taxation of the wealthier classes and by distributing tn6
proceeds of this taxation in the form of social benefits. There is also
some government aSSistance to small farmers through cheap credits and
the encouragement of the slowly growing eooperative movement. Steps
have been taken to initiate legislative protection of the interests of
small tenants; SucceSS seems improbable as long as there is an abundant
supply of agricultural labor.
       As things stand at present the most effective ways of improving
the lot of ~~e poorest classes would be an increase of the cultivated
area and;! insofar as possible, also the creation of new industries,-
prefera~y of the labor intensive type - which would absorb some of. the
rural population surplus.
                   Excessive Dependence on Cotton
       Egypt's dependence on cotton is particularly well illustrated by
the latter's share in the country's exports. During the last fifteen
years cotton accounteci on the average for some 1,% of the total value
of exports, and in the last two years it has risen to over 80%. This
great dependence on one crop has its obvious dal gers, aggravated by'
cotton's susceptibility to l'apici and wide price fluctuations; Egypt'
has suffe~ed from them repeatedly. Between 1919 and 1921 the average
of cotton prices droppeq. by 60%J the export value of cotton fell in
these years to less than a quarter while the export value of other
Egyptian products fell by less than one half. During the recession of
the 1930 l s the price of cotton dropped during one year by 40% and was
accompanied by a similar decline of exports. Imports were s:i,.m1larly
affected. When average cotton prices Were LE ,-10 per cantar (1 canter
= 99 Ibs. =45 kgs.), between 1921 and 1929, Egypt's total imports stood
at LE 45-55 million. When, after 1930 prices sa~ed to LE 2-4 per cantar,
imports went down to LE 25-3, million.
       During and immediately after World War II the Government limited
the area under cotton cultivation in order to assure higher domestic pro-
duction of cereals and other foodstuffs. These restrictions, which
temporarily encouraged some diversification of Egyptian agriculture,
bave been abandoned now and cotton is cultivated wh~rever natural con-
ditions make it more remunerative than other crops. Whi~e these adjust-
ments allowed Egypt to take full advantage of the recent cotton boom
they also increased the V'Ulp.erability of the country's economy, This
vulnerabilj. ty can be grad\laUy mi tiga ted only by increased output of
other exportrble and highly :remunerative crops, such as rice, frUits and
early vegetables for European markets, and by u1e growth of industry and
the increased proportion of domesticeotton used by Egyptian industries,
                                                     ~J
        leW
                                           *'a*

                                                              EL ARISH            \       PALESI1NE
                                                                                      \                                   '
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                                                                                              l)                   /~
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                             Beni Mazar
                             c).
                            )(
                        i    L MINYA



                        ~~!~


               'JHE
              Urn>lt\
                                                                           Legend
              DB1:;Wr                                                 I'-AIRPORTS
                                                                   ~DAMS
                                                                   at COTTON
                                                                      ~CORN
                                                                   II  WHEAT
                                                                      ef RICE
                                                                 '=.,  MILLET



                                                         ,."      "


                                                                  V
                                                                      ~ CANE SUGAR

                                                                      ~
                                                                  ~RUGS
                                                                           FRUITS


                                                                           j
                                                                             FISHERIES

                                                                       PETROLEUM
                                                                  ~OIL REFINERIES
                                                                                                                \
                                                                  %
                                                                      ,v
                                                                       CEMENT

                                                                        a
                                                                     PHOSPHATE

                                                                   C1 CAUSTIC
                                                                                SALT
                                                                                                   SODA
                                                                      W         GOLD
                                                                  ~SllVER
              DISTRIB UTION 0 F                                        ~ IRON
                                                                  ~LEAD
        EGYPT'S NATURAL RESOURCES                                  -=-COPPER



                                                                  ~
                                                                               UNGSTEN
                                                                       ~       <c,ZINC
,   ,                                               &                          MANGANESE
                                                                 .J.I. MANUFACTURES
                                                          &'-------""
                                          Source, ROYAL EGYPTIAN EMBASSY, WASHINGTON, 0.(
              III PRESENT ECONOMIC POSITION AND
                                   I
                                                  DE~10PMENT   PROSPECTS

                              A. PRODUCTION

                                Af9j culture ,
       Over 70% of hgypt·s population depend completely or predominantly
on agriculture. It is estimated that a,griculture represents about 60%
of the total national wealth and the share of agriculture in the national
income is betw~en 40 and 50%. In the crop year 1948/49 the total value
of agricultural 'product~on amounted to LE .3.30 million, to which crops,
vegetables and fruits contrib~ted 82%, and animal products 18%.

Cultivable Land and Irrigation
       The cultivated area amounts to about 6 million acres, of which 3.5
million are in Lower Egypt (the Delta) and the rest is stretched along       ,
the Nile between Aswan and Cairo. As Egypt receives practically no rain-
fall, cultivation depends entirely on irrigation from the Nile. 'I'i.1e main
development i~ irrigation during the last 50 years was an almost complete
change from the traditional "basin ll irrigation method, which made use of
the annual flood, to the system of "perennial ll irrigation, which distributes
water througpcanals throughout the year and thus permits the growing of
more than one crop a year. Consequently the area '·Jhich is annually under
crops is larger than the cultivated area and amounts at present to about
9.2 million acres. A further. extension of crops to the total cultivable
land depends on an increase of the available Nile water supply and would
require a fuller harnessing of the river largely through the construction
of large scale storage reservoirs.

Land Tenure
       Large estates of over fifty acres owned by SOllie 12 thousand people l
cover 37% of Lgypt's cultivated land; most of this area is rented to
tenants. Over 1.3% of the cultivated land consists of holdings of one
acre or less which are in the hands of some 2 million people. ~s hold-
ings of this size are too small to support a faw~lYI their owners are
compelled to supplement their incomes by working on larger estB.tes.
Farms of between one and five acreS occupy 21%, and farms from five to
fifty acres 29% of the total area. The numbers of owners in these
groups are 586 thousand and 144 thousand respectively.

       During the last ten or fifteen years the agrarian structure of
Egypt has remained largely unchanged. A comparison of figures for" the
                                  -7-

 years 1939 and 1947 indicates a slight trend tmvards fUl~ther concen-
 tration at large holdings in the hands of fewer people, snd also an
 increase in the number of dwarf-sized holdings at the expense of the
 middle-sized group.

 Crops
        The fo1lOl'Ting table gives an approximate idea of the relative
 importance of the country's main crops.

                                        Area as percentaflie of Total
                                   19}~Z~?         1948 :        1950
                                   Average
                                   ;



         Cotton                         21.1         16.0         21.7
         Wheat                          17.0         16.5         1,.2
         Rice                            5.4          8.8          7.6
         Corn                           18.6         16.4         15.2
         Clover                         20.0         22.0         23.9
         Barley                          3.2          1.7          1.1
         Beans                           h.6          4.4          3.2
         Nillet                          5.2          5.5          4.3
         Sugar cane                      0.7          1.0          0 .. 9
         Others                          4,,2         7.7          60 9
                      Total            100.0        100.0        100.0


       The above figures ShOH that in comparison to pre-war only rice
and clover have increased in proportion to the total acreage; cereals
other than rice have decreased, and cotton did not return to its pre-
war position until 1950. However, with regard to total crop value,
before the war cotton represented about 20% of the total value as
against 40% in 1948 and probably more in 1950.
         Cotton - The area under cotton now amounts to 1.9 million acres,
  surpassing the 1.7 million acre average of the last 5 pre-war years.
  In spite of tile increased area, the very poor harvest in 1950 produced
  only 8.5 million cantars (383 thousand metric tons) as compared to 9.1
  million cantara (410 thousand metric tons) in 1935/39. The 19$1 crop
  is generally estimated at about 9 million cantara (of which about 40%
  is long staple). Since Korea, spot prices have increased aharply, reach-
. ing their peak level of LE 28 per cantar in Februar.y 19$i. Since then
  prices have dropped by a,bout 1$% and it is likely that a further decline
                                   -8-

will occur because of the expected bumper crop in the U.S III The price
advantage over U.S .. cotton held previously by compe.rable Eg:yptian gro,{lths
is thus likely to disappear. Under these circumstances an average fall
in Egyptian cotton prices of perhaps 2,-30% from the 1950 level can be
expected, unless extraordinary evente should create a particularly stro~g
demand for long staple cotton.
       Cereals - The present production of about 2.J ~llion tone of wbeat
and corn leaves Egypt with a deficit of about 500 tho~sand tons of oread---
grains:- Production of ~ (1.2 rojJ..J.ion metric tons ip. 1950) nea,rly
doubled in compar:i.son to pre-war due not only to increased acreage but
also because of higher yields per acre~ brought about by a change from
broadcasting to the transplanting method of cultivation.
       Various orops - Although the area under sugar in 1950 was 28%
larger than in 1935/39, produotion increased only by some ~O%; it amount-
ed to 2,530 thousand tons oi sugar cane. Among other crops such as
onions, vegetables, and fruits only the last named were growing in import ...
ance.

A&ricultural Methods
.•     ,     ~   4




        Egyptian cultivating techniques do not always make full use of
modern implements. This is partly explained by the s:maU size of
indi vidual plots and partly by the cheapness of labor. vJhile yields
per acre are in general high, measured per head of agricultural laborer
they are very low.
         The change to the system of perennial irri~tion deprived the
soi],. of Egypt of the fertile silt carried by the Nile flood" This and
intensive cultivation have made agriculture more dependent on the use
of manure and chemical fertilizers" The bulk of farm yard manure is
'Used mostly on the food crops for local consumption such as corn, wheat
and barley. Chemica,l fertilizers are used for all cash crops and are
added to the natural manures on all other crops. .Among these fertilizers
the nitrogenous kinds are the most important, accounting for about 85%
of total consumption. Sulphate of ammonia and superphoepha te accoUt."1t
together for only 10% of total consumption (mostly 'Used in rice and sugar
crops); other fertilizers such as potash, etc., are used in negligible
quantities. Until the construction of the Suez fertilizer plant Egypt
was completely dependent on imports of nitrogenous fertilizers, which in
1949 and 1950 amounted to 569,000 and 639,000 tons respectively.
                                   -9-


Development Prospects
       The extension of the cultivated area in Egy~t depends on an
increase of the supply of Nile water during the low water season,
which is between February and the end of July. At present, the
supply available to Egypt during this season averages around 24
billion cubic meters annually (as measured by the discharge at
Aswan), of which some 16 billion come from the normal flow of the
river and some 8 billion from storage in the reservoirs of' Aswan
(in Egypt) and Gebel Aulia and Sennar (in the Sudan).
       The Nile D~velopment Scheme aims at increasing the average
water supply by additional storage at the sources of the river and
along its course, as well as by the elimination of waste of water
in swamps. While all the projects involved wo'U1d con tribute to an
increase of the total water supply, most of them would also serve
as flood prevention. From both aspects ~gypt would be the main
beneficiar,v. It is estimated that the execution of this scheme
would increase the discharge at Aswan during the critical months
by 12 billion cubic ~eters. This should permit the follolving develop ...
ments in Egypt's agriculture: an increase of cultivated land from
6 million acres to 7.5 million acres, (corresponding to an increase
of the crop area from 9.2 million acres to about 12 million acres)
and an additional increase of the crop area by some 0.6 million acres,
through the conversion of the remaining basin areas in Upper Egypt
to perennial irrigation. If lU't irrigation l.~ere applied a further
increase of cultivated land to 10 million acres (about 16 million
acres of cropland) would still be feasible within the limits of the
additional water supply of the Nile. The larger of these increases,
consisting of an extension of the present cropland by so rile 70%,
would represent a real improvement of ~~e ratio of agricultural
land to the population. It is estimated, as will be remembered,
that the latter will gt'ow by some 50% during the next )0 years.,
       Except for the vJadi El Rayan project, the execution of U;.e
remaining parts of the Nile Development Scheme requires internc:tional
agreements with those other countries of the Nile Basin in whose
territories the projects are located. (An agreement with Uganda has
already been concluded.)
       The v]adi El Rayan project alone 'l-Iould store enouf.::,h flood water
to permit the enlargement of .t£gypt1s cultivated area by about 600
thousand acres, mainly in LOvier Eg.,vpt. Depending on future price
developments, this ada:i,.tional area could be used either for export
crops (cotton and rice) or to increase domestic production of food
grains, which would reduce imports of cereals.
         2                             30                   40

           MEDITERRANEAN                    SE A
                                                           Scat. In Mil••
                                                      o        200        400




        L I 8 Y A




                                                                                2




   l.
   2. Lake Kyoga Regulator
   3· Alternativ(' sites for Lake
        Albert Dam
   4. Inlet and Outlet of Jonglei
        Canal
  5. Lake Tana Reservoir
0
  6. Site of Main Nile Reservoir
   7. Aswan Power Station and
      site of fertili zer pI ant
   8. Suez  fertilizer plant
   9. Qena Irrigation
  10. Faraskour Barrage
  11. W'adi EI Rayan Project



                                    The Nile Basin
                                    LOCATION OF PROJECTS
                                  -10-


       A group of foreign consultants are trying to calculate the value
of the benen ts which would accrue to .... gypt from both the additional
cultivation and the elimination of sporadic flood damage. Pen~ng the
results of ti19se studies it is impossible to relate these benefits to
either the total cost of the Nile Development Scheme (estimated at
LE 100 million) or to the cost of tile Hadi El Rayan componerlt (L£ 20
million). .All that can be said nOl-I is that if the l.riadi ii;l Rayan project
is carried out the country's annual net income from agriculture may in-
crease by around 10%.

       If the newly reclaimed land is used to enl<:rge some of the exist-
ing dwarf-sized holdings or to create new middle-sized holdings, the
execution of the project will bring the additional benefits of cor:.tribut-
ing to an improvement in the agrarian structure of the COlL.'1try, as vlell
as in the distribution of its income.


                  Industries, Pm,rer and Transport


},lining

        Egypt IS potential miner,,;l r..T6al th and the possibility of its
economic exploitation have not yet been fully explored. The Inost
important deposi ts exploited at present are petroleum, phosphate rocle
and mDnganese ores. Crude oil production which has been carried out
on a small scale since 1914, has increased between 1945 and 1950 from
1.3 to 2.3 million tons. The mcin fields are situated on the Sinai
Peninsula and along the Red Sea. They are operated by the Anglo-
Egyptian Oil.fields Ltd. (affiliated ..lith the Royal Duteh ShelJ,. grclUp)
and in some cases jointly with the Soeony-Vacuum Oil Company. There
are two refineries" both at SueZ, one belol1g~ng, to the Anglo-Bgy;)tia.n
and the other to the Government. Domestic output of oil products
covers most of the internal demand for mazout and ordinary gasoline, but
not for lubricants, kerosene, diesel oil and aviation gasoline. Phos!).l.ate
rock is mined on tile Red Sea and in the Nile Valley. Dur.l.ng the last " -
fi ve years production has remained at alevel of abo.lt 370 thousand tons
and has been .largely exported. The only existing factory of super-
phospha tes produces between 40-50 thousand tons a yes.r, ;'lhieh covers
about one-half of domestic reqairements. LOW grade manganese ore
deposits are found on the Sinai Peninsula. Since 1945 output, "lbleh is
entirely fo!" export, has increased steadily and reached some 150 thousand
tons in 1950. Iron o~ deposits in the nei@1borhood of Aswan gave rise
to projects for tt.e development of an iron and steel industry in .wgypt.
Other iron ore dei.~'osi ts are near Kosseir on the Red Sea.
                                 -11-

Industries
       Modern industries in Eg;~t are of comparatively recent or~g~.
Until 1930 existing treaty obligations prevented any effective tariff
protection in Egypt. Present day ind\wtrial development continues to
be handicapped by a limited variety of domestic raw materials, shortage
of fuel and cheap power. Nevertheless, since 1938 indust~ial production
has more than doubled. The most important production branches are
textiles, food processing, cement, chemicals and cigarettes.
        TeXriles - Spinneries have do~b1ed their production in comparison
to prewar; they consume at present about 1.2 million cantara of ra"t-l
cotton (about 13% of the average domestic production) and increasingly
produce for export. Weaving factories, which cover up to 80% of domestic
consumption, are somewhat handicapped by the import ban on ¢heap foreign
cotton and the necessity of using high quality E~~tian cotton for low
quality goods serving popular domestic need~. Yet both the quantity and
quali ty of the hgyptian cotton textile produ.ct:i.on have been improving
continuously. The output of wool, silkl rayon, linen ruld jute products
is of lesser importance.
       In the food processing group, the sugar industry is probably the
most important. "\vith a production of around 200,000 tons per year, based
on domestic sugar cane, it does not fully cover increased internal con-
sumption which has. continued to be rationed since the war. Alcohol and
various food preserves are also produced on a modest scale. ,The ~~
industry is f2vored with an abundance 0:( local ra1;v material. .The three
existing factories have doubled their total production during the last
five years, reaching 1 million tons in 1950 which, however, was just
enough to cover dome~tic requirements stimulated by the postwa;r building
boom. Chem~cal industries are concentrated largely on processing oil
from cotton seeds and they cover domestic need~ for low quality soap,
caustic soda, etc. A modern nitrogen fertilizer plant in Suez, built
with Exi@bank assistance, started production a few months ago, and is .
expected to reach an annual production of l.5o thousand to~l.S of m, trogen
fertilizers. Among the remaining industries a tew small, but very active
steel foundries and one copper plant should be mentioned 'tvhich use
imported raw materials as well as scrap coming at present largely from
abandoned military equipment. These plants supply various smaller metal-
lurgical factories.
Power
       Powe;r in Egypt is produced by about sixty comparatively small
plants. Apart from the Naga Hammadi hydro.. electric plant, which uses
the head ~f one of the Nile barrages, all the remaining plants are
thermal and use fuel oil. Their total production doeS not exceed some
                                    -12-

700 million   Ir~   per yearj which is little even by l"liddle Eastern
standards.
Transport
        Railways - Railway construction in Egypt started some hundred
years ago and vJas facilitated by the f.Latness of the land and the small
number of bridges required (the Nile having no tributaries).' Since the
last war there has been a considerable backlog in renewals. The type
of fuel has been changed and mazout and diesel oil have largely replaced
coal. About 25% of the railways (exclusively in the narrow gauge section)
are ov-med and operated by three private companies. The rest belong to
the State. Before the l·~ar and even for a few years after, Egyptian
State railways ~elded profits. But while rates were only slightly raised
and the vo1uxne of traffic remained stationary, operational and replace-
ment costs increased and surpluses were turned into deficits.
       Roads - Large scale road construction did not begin until 1936,
after the Italian invasion of £thiopia. Good progress has been made
and u1e road net today extends to about 4,000 miles, of which less than
10% are asphalted. Heavy postwar imports of motor vehicles brou~1t
their total number up to over 60,000.
       Roads versus Railways - OWing to the topographical layout of the
country, roads and railways run more or less parallel and a certain
competition among them is unavoidaole. The follovJit'lg table snows tile
total volume of goods carried by railways and roads during the last
three years.
                                                    Goods Carried
                                              (i.tl million metric tons)
                                           by railways          by roads
       1948                                                       13~4
       1949                                                       16~O
       1950                                                       19.7

The ascendance of road transport, in spite of its higher cost as com-
pared wi th tl1@ railways is caused by the inadequacy of the railway
rolling stock in meeting the increased demands J with consequent delays
and bottlenecks,
        Internalliaterways - The Egyptian stretch of the Nil~ and some
.1,000 miles of the canals are navigable. These LvateI";J'ays are the oldest
 means of transportation and have remained the cheapest way of moving
 bulky goods in Egypt, whenever speed is not essentia:;J:. The traffic is
 carried by about 400 tugs and some 15,000 sailing barges, which move a
total of about 9 million tons of cargo per year.
       Sea Transport - Alexandria, the third largest port on tne iv'iedi-
terranean Sea, has handled in recent years over 9$% of tJ.le countryts
exports and almost 80% of its imports; the rest goes through Port Said
and Suez. The Egyptian merchant marine is increasing ste2dily and is
estimzted at present at about 100,000 tons of gross tonnage.
       Suez Canal - Traffic through the Canal hus been increasing stead-
ily and in 1950 reached an all-time high of 81.8 million net tonnage.
The South-North movement is more important; a~out 62% of the above
tonnage consists of tankers carrying l"liddle Eastern oil. Suez Canal
operators expect tilat tanker trafiic will not increase substantially
over the next years, the efi'ect.s of larger production of crude oil in
the Midd!e East being offset by the constr.lction of new pipelines lead-
ing from Saudi Arabia and Iraq to the fledi terranean coast.
          Since its opening in 1870 the Suez Canal has been operated by the
Compagnie Universelle du Canal Naritime de Suez on tne basis of 8. con-
cession which expires in November 1968.. Aft.er that date the cana,l will
revert to .c.gypt, which is to compensate the Cornpany for the value of
stocks. Originally Egypt held 20% of the shares of the Company and, in
addition to di~dends, was to receive 15% of the Companyts net profits.
But the Egyptian shares "Tere sol,d to the Bn tish Goyernment in 1876
and the right to the participation in net profits w~s ceded to a group
of French creditors in 1880. Until 1937 Egypt derived no direct return
from the operations of the Canal. Be~ween 1937 and 1949 Egypt received
royalties of LE 0.3 million annually from the Company. This arrange-
ment was replaced by a new agreement, dated i'iarch 7, 1949 which gives
Egypt 7% of the gross receipts, provides for a gradual Eg}~tianization
of the staff of the Company, and also e;x:empts .:.gyptian goods from
tr<?,nsi t duties. In 1950, Egypt r s revenue from the Company amo1l.'1ted
to about LE 1 million.

Development Prospects
       In the inwJStrial field tile development of cotton textiles seems
to offer one of tile soundest avenues for further expansion, in partiCU-
lar if the advantages derived from the a~ilability of first class raw
material and comparatively cheap ~npower could be blended with tae
amount of foreign technical a.ssi~;tance necessary to make J::.,gy'~tian
products competitive in foreign markets. Food processing seeUIS anothe~
natural priority and possibilities of producing paper from bagasse are
being explored. The production of cement, even if expanded, may be
absorbed for a number of years by the large scale Nile irrigation
projects,and therefore would not be available for general development
purposes.
                                  ..14-

        Of the two industrial projects sugg,ested for possible lBRD
assistanc~  the fertilizer project is another natural choice in a
country whc..ch, even with tne production of the Suez plant, will have
to import annually 400,000 - 500,000 tons of nitrogen fertilizers.
Points in favor of the iron and steel will are the exj.sting iron ore
deposi ts and the increasing, dell1<lnd for iron and steel semi-manufactured
products for J.;;gyptls metal industries~ Hcwever, detailed studies of
the problem will have to be undertaken to determine vlhether or to 1-That
extent these considerations \flfJ.y be outweighed by such unfavorable
factors as lack of coal and lacK of ex~:erience in heavy industries.

       To sum up it must be said tilat industrial development in Egypt
deserves a high priority. 'hThile none of the conte.llplated proj ects will
directly provide much employment, they wi~l save the ~ountry foreign
exchange and make it less dependent on the fluctuations in the supply
of some essential products (fertilizers, popular cloth, paper).

       The aswan hydro",electric pmver project with a maxim1.lt'11 estimated
production capacity of 1,645 million K1iH per year, would increase by
more than 200% the totaJ,po'Vler available to the country. Tnis project
uses the existing dam of the aSlvan reservoir but is located far from
the centers of habitation and production in LOI'Jer Egypt. Electrici ty
can hardly 'be expected to "create its Oliffi demand" in the most remote
and m)st sparsely populated, purely agricultural part of the country.
Domestic uses and lift irrigation could tal::e only an insignificant
part of the output. The most important consumer for Aswan povler would
be the proposed Aswan fertilizer plant and, therefore, these tHO projects
are clOSely linked.

       Generally speaking transport facilities are sufficient to meet
present needs and tneir development is not a natural priority. Yet
fuller replacements of rolling stocl<: and track, still :-out'fering from
the effectl3 of World War l.i, are necessary to avoid bottlenecks and to
put t_e operations of State Railways on a profitable basis again.


                         B.   INTERJ:Jk.L FINANCE
                                  I



                               Public Finance

Budget
,      Results

 '.,    From 1940/41 to 1941/48 Egypt had budgetary surpluses which
totalled over, LE$J million. In 1948/49 and in 1949/50 deficits on
ordinary budgets of 1E 25.7 million were caused by military expendi ..
ture during and after the Palestine vlar, expenditures on the ,Hve Year
Plan amounting to 1E 13.1 million and a repa:Y'1llent of 1E 5 million of
the National Loan, whi.ch 'Was not due during this period. Other con-
tributing factors were increased outlay on free education, new social
ser"vices and higher cost of living subsidies. The LE 13.1 million
                                        -15-

expenditure on the Five Year Plan was covered by drawings on tte Reserve
Fund. The remaining deficit was met from the proceeds of the LE 30
million internal loan. The following table shows actual results for the
last two fiscal years:

                                    (in l..E million)
                                                                     SUrPlus r
                                                                     _____   I
Year
...---
                    Receipts  i
                                                                     Deficit-

1948/49 (a)             =1.42.5                         157.7         ... 15,,2
1949/50                 158.5                           169.0         ... 10.5
(a) from 1'1arch 1 to February 28


       Estimates for 1950/51; for an interim budget covering liarch 1, 1951
through June 30, 1951 (caused by a change in the budgetal'1J year); and for
the year 1951/52 are shOVIn below:


                                    (in million 1E)

                                   Estimated
Year                         Revenues    Exnenditures           Deficit

1950/51                            180.9         20509          ... 25.0
(Provisional results)             (192.0)       (195,,5)        (-   3.5)
Narch 1, 1951 )
June 30, 1951 )
1951/52
                                    60.5
                                   212.4
                                                  68.2
                                                 231.0
                                                                -    7.7
                                                                - 18.6

Provisional results for 1950/51, indicated above in brackets, are in keep-
ing with Egyptian budgetary tradition '1fhich invariably underestimetes
revenues and overestimates eXJenditures.


~ods      of Budgeting and Accounting

        The general budget includes the gross receipts and ex)endi tur~s
of the State Domain, State Railways, postal and Telecornrrm.l"lication services,
receipts fr')fIl sales of public land, and profits ,from sales of goverrunent
hel-d cotton stocKS. Small, separate budgets, partly subsidiZed from the
generol budget, exist only for uni versi t~es and the hinistry of vJakfs
(religious and family found:t:LOns).

       Budgetary sUI'1)luses and various non-recurrent receipts a.re paid
into the General Reserve Fund. This fund is used to cover budgetal"'J
                             I   ,




                                     -16-

deficits, expenditure on the Five Year Plan (see below), and certain
expenditures outside the general budget, such as losses from cotton
and ·wheat sales or extraordinary redemption of public debts. The
Genera.l Reserve Fund is divided into a "Blocked Reserve" and a uFree
Reserve. 1I The former represents loans to Credit Institutions, muni-
Cipalities, etc., and subscriptions to the D1F and the IBRD. The
"Free Reserve" is heavily earmarked for such purposes as estimated
budget deficits and financing of the remainder of the Five Year Plan.
As per 28 February 1950, the last date for which accounts were closed,
the total Reserve Fund amounted to LE 80.1 million, of which LE 31.2
million was blocked and LE 48.9 million was free. Out of the free part
of this reserve only LE 6.8 million were not earmarked. The free re-
serve was held partly in cash (LE 27.2 million) and partly in Egyptian
bonds (LE 21.7 million).

]}1ain Revenues and Expenditures
           i




       As compared to prewar years, the relative importance of customs
and excise duties have declined somewhat, but they still represent
about 70% of total taxation receipts. Of the remaining 30% about 10%
is covered by other indirect taxes and 20% by direct taxation. Tl}.e
latter form of taxation is gradually being emphasized more heavily.
Taxation of various forms of income was introduced fer the first time
in 1939; the general income tax has been effective only sll1ce JanuarJ 1,
1950. An inheritance tax and a property transfer tax were a~so intro-
duoed during the last ye;:..r and the rates of tbe land tax l1Tere doubled.
On the whole the Egyptian tax;:..tion system is still quite regressive
but a definite improvement is noticeable.
       With regard to    e}~enditure,   national defence haS increased from
5% in the prewar period to 20% of the total budget in the last few
years. During the same period the outlay on education, health, end
socia1 welfare rose from ~6% to 18%, and debt service decreased from
10% to less than 3%. Se.laries, wage::; and cost of ~iving allowances
represent well oyer 40% of the total expenditure.
          Among public enterprises the Egyptian State Rail~vays have shown
de.;f'icits during the last years ranging from LE 1.2 to LE 5.4 million.
Losses were also shown by the State Domain in spite of great profits'
from agricultural land in Egypt.                                        .

Government Investrr£nt
  i



       In recent years, up to one third of estimated budgetary expendi-
tures have been carried under the tit;Le of "new works. 1I T'nis title
                                           -17-

 covers a variety of mili wry and civilian expenditure. Amounts actually
.spent on IInew works" rarely exceed 60% of the corresponding appropria-
 tions. The follov-ling figures show the estimated and actual eXl')enditurc;:s
 under this title during the last two years •

                                 . (in million of LE)

        ~enditureon
                    4    .
                             New Works
                             i    .'   i
                                                  1948/49
                                                  .-        1249{50
             Estimated                              36.8      54.6
             Actual                                 22.3      33.5

Prooably not more than Some LE 10 million in eaCh year were spent on
projects having a more direct importance for the productive capacity
of the country.
       "New works" also include allocations for the Five Year Pla.n
established in 1946. This plan is actually a group of various projects,
not connected rrith each other, which were selected in 1946 as deserving
public financing but not promising quick returns. They include irri-
gation, housing for workers, railways and roads, participation in the
Industrial Bank and other projects totalling LE 33 million. Until the
end of the fiscal year 1949/50 only LE 18.3 million were actually spent
on the projects of the plan.


    , Debt
Public
       Most of Egypt's indebtedness was contracted abroad in the second
half of the Nineteenth Century for ~~e development of the country I the
building of the Suez Canal and also to meet some extraordinar,r government
expenditures. Between 1890, when the debt was at its highest, and, the
date of its conversion in 1943 1 the debt decreased from LE 106.8 mil~ion
to LE 89.1 million, (of which about 60% was repatriated). In addition
internal loans totalling LE 13.0 million had been contracted in various
years for the financing of the cotton crop. The pub~ic debt in 1943,
therefore I totalled LE 102.1 million. During 1943 the foreign de-ot Has
mostly converted into internal debt (the Nationa~ Loan) and a part was
repaid in cash, leaving a total public debt of LE 92 million and practi-
cally no foreign indebtedness.

       Between 1943 and 1951 the domestic debt was reduced by repayments
of LE 28.8 million on the principal of the National· Loan, but two loans for.
the Palestine war, totalling LE 30 million, were issued in 1949. Consequent-
ly the total Egyptian long term puOlic debt (as per June 1951) amounts to .
approximately LE 93 million; its annual sex"vice charges are LE 5.6 million.
                                    -18-

       The short term debt consists .of Treasury Bills amounting to LE 60
million, issued for the note cover. There is also an outstanding amount
of over LE 30 mj.llion Treasury Bill~ beld mainly by the Ban.~ing Depart-
ment of the National Bank of Egypt (Central Bank), which was issued to
provide the Government with cash to meet current expenditures and to
ftnance cotton purchases.

Prospects
        Future Buqgets - While the 1948/49 deficit was caused by extra...
ordinar,y war expenditure, the deficit in 1949/50 as well as the probable
1950/51 deficit arose from an increase of ordinary expenditures. In
1948/49 and 1949/50 actual expenditures increased on the average by 54%
over the average of the two preceding years, and further substantial in-
creases are enVisaged by the new budget estimates. Between the same two
periods revenues increased by only 31%, althougn they included some extra~
ordinary, non...recurrent receipts such as German and Italian vTar reparations
and government sales of accumulated cotton stocks.
        In the next years the anticipated drop in cottQn prices and a sub-
sequent, probable decrease of imports will affect receipts from customs
and excise. The cotton export ~ has already been lowered in an attempt
to otfset priee drops in the world market, and some essential tood imports 'Viert:
freed from custom duties with the intention of combatting the increaSing
cost of living. The new incoi~e tax Will draw on hitherto untapped sources
of taxation, largely in the industrial field, and therefore may not be
affected by lower cotton profits. In view of ~~e modest proportion of
total revenue represented by this tax, a slight increase in it is not
likely to balance any decrease in revenue from indirect taxes~
        While revenues can thus be expected to decrease, or at best to
remain on the present level, economies on the expenditures side of tpe
budget will not be easily achieved. For political and social reasons
the Government may not be willing to go bac~ on its expended social,
health, and education program. A slow-down of the originally plan.'1ed
pace of further expanSion is all that can be 8xpe~ted. A decrease of
mili tary expenditures seems equally unlikely. Certain economies might
be achieved by a reduction of the number of state employees. The re..
equipment of State Railways, together ~nth their reorganization, may
make them again a source of net profits as they were before the war.
All these changes, however, will require a certain amount of time.
       To sum up, it is probable that Egyptian budgets during ti1e next
years will tend to show defici ts. These· deficits can be covered only
by a furt11er increase of the internal indebtedness and most likely by
loans trom the Central aank.
                                    -1.9-


       ~J!w;m.\l1ian?~1tbfEi:L~C5~.ga -In view of the. general
budge~SItuation a large development prog~ not be f~anced
from C'I'J.l"rent revenues. The most. that can be expected is that the Govern-
ment Will continue to finance.a certain amount of investment at the
modest. rate of the Last few years. Except for LE 1 million for the Owen
FaUst dam, no expenditure is ant1cinated in tbe 1951/52 budget for the
execution of any  of    the projects disc.usset;! with the Bank Mission. The
difficulty of loeaLcu:rrency financing will likely be a Umiting factor
in the Governmentta development program.

 .     Internal. loans are trequen'tly mentioned as the .only source of
large-$eale development .financing by the Govemment. In fact, Parliament
has already approved in principle a LE 24 million loan tor the Aswan
hydro-electric project. althougb no practical steps toward the floating
of such a loan have been taken yet.
        Some t'UIlds for the financing of development could also Qe obtai..7'led
from the.. liale of tlle cultivated lands of the State Domains (about 300,000
acres), even on an instalment-p~ent basis.


                   Mon~2)   Banking and Investment

Currenoy; and BankinS
       The Egyptian pound (LE 1 :: lOO piasters) is legal tender in .t:gypt
and in the Sudan; certain amounts of it also circulate in Libya. Since
September 1949 .. When the Egyptian P·ound followed the Sterling devaJ..u.ation"
its par value bas been LE ~.:. iiZ.87.

        The National Bank of Egypt O~.B.E.) has been the bank of issue
since its foundation in 1898 and has always performed most of the f~~ctions
of a central bank. .The law of i:v.iarch 27.. 1951, gave it all the prerogatives
of a central ba.nk, and provided for a fully Egyptian manag.ement. Shares
of the N...B.E. have been in private.. handa. As tar as can be estaolished,
there was a shift in ownership from foreigners to~ Egyptians. Sim'1.lltane-
ou~1ywiththe strengthening of the Central Bank functions of the N.B.E.,
the activities of its Banking Department have been somewhat curtailed.
The N.13~E. 'is to refrain from small commercial operations, unless these
are necessitated by public.interest.
         The new, Central Bank l,.aw provides that banknotes in circulation
lIlUSt be fully covered by gold,. for~gn exchange, foreign securities and
Egyptian Government bonds and Treasury Bills, without presCJ:ibing the
proportion between these various elements.. As of June 2, 195J:., this
proportion wast' gold 22%,. B:r.;ttisb Securities 48%.. Egyptian Bonds
                                  -20-

and Treasury Bills 30%. The Minister of Finance is allowed, with the
approval of the Government, to issue Treasury Bills eligible for note
cover up to the amount of LE 100 million. The Bank may grant advances
to the Government to cover seasonal deficits in the budget to the
extent of 10% of .the total average revenue during the previous three
years; these advances have to be repaid not more than a year later.
Eighty five percent of the net profit from the note issue opera.tions
and half of the excess of dividends over 20% of the nominal value of
the shares accrue to the Government. The Supreme I10netary Committee,
a body created by the New Central Bank Law and consisting of four
government officials and three representatives of the Central Bank,
will determine what proportion of their deposits commercial banks
are obliged to keep with the Central Bank as a non-interest bearing
reserve balance. Before the new legislation, banks voluntarily kept
on the average over 25% of their deposits with the N.B.E.
        Commercial Banks operating in Egypt can be divided into three
groups: (a) Branches of foreign banks, most of which started opera-
tions in Egypt before the end of the last century. They are concerned
largely with commercial, agricultural and mortgage credits~ (b) Purely
Egyptian private banks" the 12.rgest of \fhich Bank Iviisr, founded in
1920 isa~so the large~t bank in the country.      It concentrates on
industria... financing ana heads the Nisr group of some 18 industrial
companies whose activities range from textile~ to shipping and from
airlines to film production. (c) Egyptian banks with Government
participationl such as an agricultural bank, a mortgage bank, and an
industrial bank (which started operations only in 1949). Nost of
the banks contribute in one form or another to the financing of the
cotton crop through credits to growers, merchants and textile manu-
facturers. This operation, which reaches its seasonal peak in
December has been taxing rather heaVily the credit resources of
Egyptian banks, especially since the 19.50 increase in cotton prices.

Noney Supply
       The following table shows the movement of the money supply and
its various components since 19470 The money supply, as indicated
below, includes all currency in circulation outside banks and all
current depOSits with the N.B.E. and clearing banks, excluding inter-
bank deposits.
                              (:i.n million LE)
                Net
               'C'Urrency        Govtt            Other      Monex
End of          Circulation      DepOSits         DepOSits   S4i~lY
1947               141              95              lW-
1948               15.5             53              194      402
1949               170              80              175      42.5
19.50              189              61              170      426
July 1950         148               n.a.            n.a.     374
July 19.51        165               n.a.            n.a.     n.a.
                                      -21-

       Between 1947 and 1950 the net currency circulation increased by
LE 48 million and it is worth noting that the proportion of currency
in the money supply has risen.from 34% to 45%. Total deposits dropped
by LE 34 million but banksf credits increased from LE 77mi11ion in
1947 to LE 127 million by ti1e end of 1950; which indicates a substantial
decrease in the liquidity rate of banks. The increase in bank credits
can be explained by the growing building activity, stockpiling and by the
higher prices of exports and imports. Withdrawa.ls of Government deposits
were caused by the necessity of drawing on reserves to cover current
budget deficits.


Prices

        The movement 01 the price indexes during the postwar years is
indicai'ed in· the i'ollcwing table:

                                     Whole Erice        Cost of livin~
         End of                        index                index
         •
         1945                            100                 100
         1946                             95                  99
         1947                             93                  96
         1948                             97                  97
         1949                             97                  97
         1950                            ill                 105
         First quarter -
         1951                            ll3                 106
The price level remained comparatively sta0le until 1949; it increased
by 14% during 1950 and a further Slig!lt increase is noticeable in 1951.
The cost of living increased during 1950 by 8%.

       Inf.Lationary pressures in Egypt arose from the increase in the
currency circulation, which in turn ~ras generated by increases in
Egyptian cotton prices, increases in world prices and, to a cel'tain
extent, also by domestic deficit financing. The cost of living would
have been more heavily affected wek'e it not for large imports of COl1Sll.'1ler
goods and such anti-inf.j.ationary measures as rationing, price controls and
price subsidj"es. Even if prices of .:.!!i:;.Y;Jtian cotton should drop Eind
prices of imported cormnodi ties should remain apl-~roxL,lately on their
present level for some time, deficit financ:mg, one of the inf.J..ationary
factors at ",;lOrk, is likely to continue for a number of years.

Investment and Capi tal    flarke~

       In the absence of most of the relevant data it is very difficult
to estimate the present annual rate of investment. The folloV-T:l.ng are
a few general observations on the subject.
         Capital formation in ~gypt is favored by the fact that the
incorr,e from capital represents a relative~y high proportion of nation-
al income, and that it accumulates in the hands of a small group of
people. The effects of a stepped-up rat~ of accumulation in postwar
years may have been nullified to a certain extent by the f~gnt of
Jewish and foreign capital from Egypt induced by the Palestine 1iJar and
by some harsh provisions of the new Egyptian Corporation law.

       Increases in "earnedll incomes, affecting wider groups of the
population, if not entirely offset by price increases may have been
partly absorbed by higner consumption and partly hoarded in the form
of gold.
        Savings accounts Witll banks and with the Post Office went up
very slightly - from LE 51.8 million in 1948 to LE SSe5 million in
1950 •• Life insurance, another form of savings, is of small importance.
Total reserves of insurance companies increase at a rate of about
LE 1.5 million annually and at present amount to some LE 18 million.
       Investment in housing - mainly modern apartment blocks in Ceiro
and Alexandria - is high; it is estimated at around LE 30 million
annually. With regard to industries, in 1950 the capital invested
in new companies and capital increases of the existing companies totalled
over LE4 million in addition to new debenture issues of over LE 1
million. No data are available on investment in agriculture.
       The current level of private investment in Egypt seems not too
low for an underdeveloped country •. Some funds for development projects
of high priority could be obtained if investment in real estate could
be reduced or some of the gold de-hoarded.
       With regard to the prospects of Government borrowing in the
market some indications are provided by the following data. The last
public loan in Egypt was the LE 30 million Palestine War Loan,which
was covered up to LE 22 million by banks and various financial institu-
tions and only to LE 8 million by the public. Yields of Government
bonds have been increasing steadily during the last years. The redemp-
tion yield of the 3-1/4% National Loan (1963-73) moved up from 2,,7% at
the end of 1947 to 3.5% in the middle of July 1951. Bonds of the Nation-
al Loans are free of death duties and interest payments on them are free
of income tax charges. In the present circumstances it seems most likely
that any Government issue to finance an adequate part of the develop-
ment program could only be partly sold to the public: the part that
would be underwritten and taken by financial institutions would lead
to the expansion of central bank credits.
General
       The follo\'fin~ table shovTs Egypt) s foreign trade durinF! the last
three years compared \<lith 1938.

                                       ( 1r alue in   millions of I.E)
                                              1948        1949    lliQ

                Exports                       132 .. 6    138.7    184.8
                Imports                       162.5       158.3    221.7

                           Balance - 6.7     - 29.9 - 19.6 - 36.9

       The striking increase in the value of Egypt ' s foreign trade is
mainly a reflection of hi!!:her \'lorld prices and of the devaluation of
Egyptian currency. Volume of foreip,n trade increased on a much smaller
scale. If the values of imports and exports are related to the movements
of price indices the following index figures are obtained:

                                               1948       1949
                 Exports             100.0    109.:3      118.3
                 Imports             100.0    154.2       159.6

The vo1U:'TIe of foreign trade has increased substa,ntia11y as a resvlt of the
great improvement in the countryts terms of trade since the midnle of 1947.
W'hile cotton. Egypt' 9 main export commodity was sold in 1950 at five times,
and rice, second in importance. at four ti~ee the pre1;"ar priCe, prices of
Egypt's main imports increased on the average only three times.
        Since 1938 import surpluses ha~e become a repular feature of E~ypt's
balance of trade. During the \-lar they "rere caused 'by a fall of exports
resulting partly from the substitution of g-rain for cotton production and
:partly from transport difficulties; in the postltTar years they have been
neCessitated by the backlog in imports of ~reviously unavailable equipment
and consumer goods.. Imports vTera further stimulateo. bv increased demand
created by higher incomes from exports;to offset inflationary pressures ~en­
erated by the continUing high level of incomes, the Government has adopted
a liberal import polfey. Since the Korean War, stoek?iling has also con-
tributed to a high level of imports.
Comp2sition of Foreign Trade
          Ra~r materials and food (cotton, rice. onions and phosphate rock)
normally account for over 86% of Egypt! s ex-oorts. Among industrial good.s
the only items of any importance are cotton yarn and certain cate.<:l'ories
of heavy mineral oils.

        Du.ring the last three years, some 16% of im-oorts consisted of machin-
ery and. means of transport, over 20:$ of food, the balance beiIlft ra\tl materi-
als, fuels and cons'tL1Jler goods. Imports of unessential consumer F!'oods i,rere
estimated by official sources at LE 50-65 million annually, or about 301
of total imports.·


Directions of Poreie:n Tr,ade

         Eefore the ,,,ar three quarters of Ff'Ypt; s foreig':" t:::-ade ':ras N'1th
Europe" rthis ratio is no"r bein£ re·-establisneJ. Tn 1950. ths TT K. re-             0

covered its traditional first place \·ri th re?;ald to bO'~h ::¥:yptian imports
and export s; (in 1949 India vnw Eg~7pt j s largest; customer;" Trade            th       ,·Ii
France has increased considerably and transactions \'r1 th Italy. Germany and
S"Ji tzerland have also been on the u:9grade. Trade \. . ith other !vfiddle East-
ern countries. apart from imports of oil products, has remainen comparatively
insignificant, but trade ~~th the Far East (imports of jute, tea and su~ar)
and ..rith Australia (1'Jheat) has gro'(.'l1 in importance. Trade "!ith the U.S~S.R.
consists of large barter deals of cotton and rice a,rainst cereals.


lrade with the      n.,s,
           The following table sho,,'s Egypt· s tra,",e \<ri th the U.    s..    (accordi:ng
to   u.   S. statistics):
                                                (in million of $)

                                            EXports      Imports         Balance

                 Average    19,)0/38          8,2          8. LI-               0.2

                  1948                        ,)0.8       ,)6.3                 5.5
                  1949                          9.1       52.8             43.7
                  1950                        30.2        ,)2.0                 1.8

       Eef ore "fodd War II trade '-Ii th the U. S. represent ed, on the aver-
age, only about 5fo of the total value of Egypt's foreign traCie. Cotton
was the chief export and the main imports vlere automobiles, petroleum
products; grain and machinery. Exports and imports were almost balanced
in value. After the \'Jar the U. S. share in Ef!Ypt l ~ trade increased cQn..
siderably, and on the import side i t partly replaced trade ,.,1 th io,"estern
Europe. During the last three years Egypt has had an adverse trade
balance ,-,ith the U. S.; exports a!lc1 imports, ho",ever, fluctuated too
",tdely to indicate any new pattern of trade. Certain shifts in the main
import ~roups have occurred ~ e.g. machinery ("'filich before the \<rar did
not exceed some 10;& of total imports) increased to 20~ during the last
th1;'ee years and tobacco increased fr:>m less than 5i before the ' . . ar to
about 8% in 1949 and 1950. AU'(;omobiles remained the 13,Y'gest impo:;:'t i taM.
On the other hand r;etroleum produd imports fro:n t::'e Ur S, baITe been Cle-
creasing steadily due to 1a1'ger domestic production         in0r';~ased ava-ila..-
biU ties from the sterling area. Cotton exports ,-rere 611h&t'.ceCl. b:r such
extraordinary factors as stockpiling in the U. s. in 19.:50 .•



                               BeJ,_~nt;G
                              ...... ____ cf po,~,!\~~.~·t:3
                                           ,_._  . _10 ____-,. _


        The fonowing table      ShOllS     estinates of                 18   balance of payments,


                                            (in millions of LE)

                      1948                  194 2                               lliQ.
                             (of \"'hich in      (of \-ihich in                       (of which in
                              hard curren-        hard curren-                         hard curren-
                              cies)*              cies)                                cies)

Balance of trade   - 29.9         (-8.4)         - 19.6            (-.5.2)    ... 36.9     (f 8.3)
Balance of invisi-
  bles             I- 17.7        (fO.8)          f 24.5           (f5.5)      I-   22.9   (f .5.3)
 Total Balance of
 Current Payments    - 12.2       (-7.6)          f    4.9         (f0.3)     - 14.0       (.f.   1).6)
           * Inc1uclinA' U. S. and Canadifm dollars, Portumlese escudos,
             3elgian and S",iss francs.

 Source: National Bank of      E~t.

       During 194s..,.50 Egypt f S trade balance ,"as adverse but i t had sur-
pluses on invisible account. In 19L~9 the surplus of invisible receipts
covered the trade deficit, and left a small balance of payment surplu.s.
In 1948 and 1950, however, overall deficits on current account developed.
The combined defici h for these t"ro years totalled LE 26.2 million and
were covered by dra1tlings on sterling balances.
                                          ... 26_

       Egyptian balance of trade figures do not necessarily ref1e~t pay-
ments and receipts in different currencies. During the last fel~r years
Egypt has been importing hard currency goods from soft currency countries
against payment at a premium in the so-called E?yptlan "export poun<"'is. 1t
Egypt has also obtained payments in dollars for cotton and rice exported
to soft currency countries. As a result of these transactions, as '·rel} as
of the conversion of l. 15.5 million into dollars under ster1i~ oala'!"ces
agreements 1:11 th the U. K•• during 1948-1950 Egypt increase.,. its f"old olil
dollar holdings by $100.6 million.
        The main payments and receipts on invisible account are sho'Vrn in
the following table:

                                                     (in millions of :GE)

                                    Receipts                                Fa:''me:n.ts
                               1948   1949               1950                              1950

Suez Canal dues                18.4         23.0         26.2
British Army exyen~iture       23.1         11.5         13.0
Interests, dividends, etc.      3.7          IJ-.8        4.6        6 w8      13.7        1$.8
Shipping                       n.a.          7.9          7.5       n.a.        P.8         7.0
Tourism, pilgrimage and
 maintenance remittances       n.a.          0.1          0.5        7.3       10.4         f .. 9
Capital remittances                          0.8          1.2        8.4        5.3         4.8
Egyptian (lov't expendi-
 tures                          ...                                  6.5        6.4         5.1
Transit trade                   l .. L~      1.9          1.7        4.8        1.1         0.9
Film royalties                                                       0.3        0.2         2.0
Others                         1hl          ~            ~          10.3        7.8        16.1;
                        >.",


             Totals            62.1         7P .2        83.5       Lt4.4      53.7        60.6

        The largest single source of invisible earninf1's in the EP.:'Y1)tian
balance of payments are the receipts from the Suez Canal traffic~- Tolls
are paid by s~ips in the currencies of their countries of rep-istry and
are surrendered by the Suez Canal Company to the Government against Eg~r~tian
pounds. The next largest item is the expenditure of the British forces
stationed in the Canal Zone. Receipts from shippin~t the third larrest
item t in 1950 for the first time sli,g:htly exceeded the corres]Jond1ng Hem
on the der1tside. The largest disbursements on invisible account are
grouped und~r "lnterests, dividends, etc.", and include profits of foreign
companies1 the second largest item h expencU ture of Egyptian tourists
(mainly in Europe and the Lebanon) and pil~rims (Saudi Arabia).
                                   - 27-




        As of June 1951 the foreign exchange holdin~s of the 1J'. B. E.
amounted to ap:lroximately the equivalent of s.. 970 mi Uien. They consisted
of about s.130 million iT: gold, $120 million in o.ollars and U. S. Government
secur! ties\ $ 700 million in sterling and ~.20 million in other currencies.
In addition to these assets. private banks ,"'ere holclin;fC foreien exchanf-'e
to tce eqn.i valent of about $90 milliO:l.

        Since July 1947. when Egypt left the sterling area, the drawin~ on
sterli~   balances of Egyptlan banks was reF"Ulated by derlirl,!? balances
~reements bet,·reen the U. IT. and Egypt, each of ",hich covered periods of
approximately one year. UnCler these af.;reements sterling- balo>nces (leereased
beh,e~m July 1947 and March 1951 from 1. 356 million to ~ 292 million or
by Is 64 million. "Thieh corresponds to an average of Is 16 million :?er annum.
The transferable part of thepe balances (Account No.1) amounted, by the
end of that period. to about ~ 62 million and the blocked part (Account
No.2) to Is 230 million.

        A net'l. ten-year financial agreement between the F. K. and Egypt
"ras concluded in March 1951 and signed on July 1, 1951. Its main provi-
sions are:

       (a) From the blocked account (:Ho. 2) an immediate release of ~ 25
million will be made. of i"hich ;J;, 14 million ''''ill be converted into dollars.
(No further conversions into dollars are foreseen.)

       (b) Further releases at the rate of u) to ;. 15 million a year "Iill
be made behJeen 1952 and 1960.

       (c) The U. K. ".,i11 facilitate Egyptian im:t)orts of oil products
~ainst payments in sterling up to a total value of ;J;, 11 million per an-
num for ten years.

       Cd) Discussions on the disposal of the remainder of the accumulated
sterling balances (Is 80 million) shall take place before the expiration
of the agreement.
                                      - 2? -




EYi~ting ~ternal    Debt

          At present EFypt has virtually no external public debt. Its pre-
,,,ar ;,     million sterling debt ,..ras converted into Egyptian bonds durinp
"iforld "liar II, and Egypt has no obli!1;ation to provide foreip.n e~ch[mee for
the servicing of converted bond~ which may be helcl abroad. A:'1 a'TJount of
$3 million which was purchased fron the International Monetary Fund in
1949 was repaid in 1950. The Government 1 S outstanotnF'-' e,-ternaJ. oblip'a-
 tions arise from -
        (i)   the transfer Fmarantee for the service of the $?_l!L, million
              Export.... Import Bank credi t to the Suez Fertilizer Compan~T t and

        (ii) the guarantee of the City of Alexandria sterling loan of
             'IThich ;, 200.000 '''ere outstandine in 1950.
       These two debts in adcU tion to other kn01!.'ll uri vate external debts
total the equivalent of $10.3 million; thei!' service requires from $1 - 2
million annually (of which t,·!O thirds is in dollars) behreen 1951 and 1956,
thereafter d"rindl1ng to negli?i ble amount s.


Overall Debt   Serv~cir2   Capacity

        In spite of balance of payments deficits, at present Egyptfs external
financial position can be regarded as very strong. The country has foreiF'-'ll
exchanee holdings equivalent to over iiil.O billion (I.E .31~' million)   Balance
                                                                          0

of payments defiCits, avera~ing during the last three years LE 7 mill1o~,were
due to trade deficits 'II!hich were not fully covereil. by surpluses on in-
visi ble account. The questions bef"re us are ~vhether:

        (a)    the trade deficit can be reduced in the future, and
        (b)    the surpluses on invisible account can be increased to
               cover trade deficits.

       The outlook for a balanced trade may be considered favorable for
two reasons:

       (1) The trade deficits in the recent years "t'lere due to tempora!""!
causes, i,e. lar?e imports of capital goods resultinp- from wartime back-
logs, and exceptionally high imports of consumer goods stimUlated by a
liberal import policy desi~ned to check inflationary effects of high
cotton prices. 'rhe backlog of eouipment has alread;,! been largely satis-
fied. 'rhere is also a stroDF possibility that the prices of E~ptian
cotton may decrease in the near future by, say. 30~. This, of course



                                                    •
will lower the value of exports but because of the traditional dependence
of imparts, espeoially of unessentials, on the level of catton pl'ices, a
loss of export reoeipts, within these limits, will be largely offset by
a decrease of consumel"s' imports. Once :i,nf'lationary pressures have
slackened the Government could, i f neoessar/, introduce some restrictive
measures to reduoe the trade deficit.

       (ii) The proposed economic development which provides for increas-
ed production of eA~ort goads (cotton and rioe) and of some industrial
products now purchased abroad (fertilizers, textiles) will bene!i t the
balance of trade in a permanent way. The combined foreign exchange earn-
ings and sanngs from the proposed irrigation (t'ladi El Rayan) and ferti-
lizer (AsT.-ran) projects for j.nstance are estimated to amount to LE 15-20
million annually, which represents over one half of the average trade
deficits of the last three years.

        There are no prospects in sight for increasing receipts on invisi-
ble account. Barring a loss of receipts from expenditure of British
troops in the Canal ZO.':18 (about LE 12 million antlUally) it may be reason-
ably expected that invis::'bla receipts can be maintained on their present
le~lel.  It is also eX"pected that there wj.ll be no increase of payments.

       Thus, if development is carried out effectiVely, a balance of pay-
ments 5tL"'plus ought to be obta;_ned within a few year~, and it can be
reasonably expected that initially Egypt could devote about 2-4% of total
expected foreign exchange receipts for -tte servicing of external loans
for development.

          Should the effects of development on the balance of payments be de-
layed a substantial safeguard for the serVicing of foreign loans i.s pro-
't.rlded by Egypt's gold and foreign exchange holdings. These holdings are
also sufficient to cover modest balance of payments deficits which may
s~ill con~inue for the next few years until the effects of development
make themselves felt, or Which ~~y arise out of a deterioration of bgrptfs
terms of trade other than the already anticipated drop in cott.on Friees.

Dollar   D9~ Ser~~     Capacjj:...z

          Since Egypt left the sterling ~rea in 1947~ official gold and
dol.i..ar holdings have increased frOlil $78 million to $250 million. This
favorable development was largely Que to ter,'f!orary factors such as con...
verflion by the U.K. of ; 15",5 miJ.lion into dollars, exceptionally high
exports of cotton to the U ".1 :J2.1es of cottD:1 and rice to non..dollar
ccunt:d8:? agai':!st dollars) an1 p1.lj.'t:hases of dollar goods against soft
CUj:rEmd,z<:3" Wnile this gold and dol.i.e;.r reserve is an important factor
in apprai~ing Egypt's credi tworth:i.r..ess, the country' 8 future capacity
to service long-term dollar loans has been estimated on the more reliable
basis of prQspective dollar earnings from bilateral payment relations
wi th the U.8..
       This estimate is based on the following considerations:

       (a) Trade with the U. S. ehoulft B'radually revert to its pre,.,ar
balanced position. i'lhile exports to the U. S. "Jill presumably not in-
crease, imports from the U. S. are expected to shrink further in favor of
revived imports from Europe, following the recovery of 1'Testern Europe and
the reappearance of Germany on the Egyptian market. The ~hare of ~ter­
ling oil imports will also ~row as a result of the recent Anglo~E~Jptian
financial a~eement.

       (b) Even if, for the purpose of arrivin~ at a conservative estimate
It is assumed that imports of equipment from the rT. S. should continue on
the postwar level. the trade deficit should be small.

       (c) There is no reason to anticipate a substantial change in the
present surplus on invisible account.

       All these considerations lead to the conclusion that Eg:rptls over-
all capacity to service forei~n loans includes ability to service dollar
loans of a moderate amount.
                                                                                                EGYPT
               POPULATION AND CROP AREA
          (MILLIONS OF PERSONS)                                                           (MILLIONS OF ACRES)
          20~·------~----------~----------.----------,-----------r-=~20

                                                              POPULATION
          15                                                                                                     15

                                                                                                                 10
                ---- -------                        .,~;:~;    -------
           5                                                                                                     5

           O~----~----------~--------~----------~--------~~O
          1900            1907                    1917      1927                1937                1947 '50

               DISTRIBUTION OF LAND OWNERSHIP
               (PERCENT OF                                                                            1947
               ACREAGE)
                                                                        SMALL HOLDERS
                                     LARGE HOLDERS                      (Less than 5 acres)
                                      (Over 50 acres)




                                                                      MEDIUM HOLDERS
                                                                   (Between 5 and 50 acres)



               COTTON: ACREAGE AND YIELD
           (MILLIONS OF ACRES)                                                                          (POUNDS)
           3'Y-E-A-R-Ly--~--------~~~--.-------~------~--------r-----~600
                                              YIELD PER ACRE (POUNDS)


           2                                                                                                     40C




               COTTON: OUTPUT AND UTILIZATION
               (MILLIONS OF BALES)
           3.-------r-------,~--------------,--------r-------.------.3
                                                                                                    YEARLY

           2                                                                                                     2




           o    1946-47---'-'9A..4   7
                                 1!o..i1iii- 48   1948-49
8/20/51
No. 576                                                                              I.B.R.D. - Economic Dept.
                                                                                       EGYPT
                TOTAL EXTERNAL TRADE
             (MILLIONS OF EGYPTIAN POUNDS)
          3oor---------~--------~--------~--------~----------~300
               YEARLY


          200                                                                                            200

          100                                                                                            100

            0
                          -                                     ....
                                                                                                         0
                COTTON PRICES
                (EGYPTIAN POUNDS PER CANTAR)
           30                                                                                            30
                 ANNUAL AVERAGES

           20                                                                                            20

           10                                                                                            10

            0                                                                                            0
                                                YEAR ENDING AUGUST                               SMO.
                                                                                               AVERAGE
                TRADE BALANCE
                (MILLIONS OF EGYPTIAN POUNDS)
          +50                                                                                            t50
                 YEARLY




          -50~~~~~~~~~~~~~~~~~~~~~~~~~~~~-50

           1900                  1910          1920           1930       1940                 1950
                TERMS OF TRADE
                (INDEX,1938= 100)
          600.--r--~~---r--r-~--~~r-~--.-~--.---.--r--~-.600
                  YEARLY

          400                                                                                            400

          200                                                                                            200

            O~~--~--~~--~--~--~~--~--~~--~--~~J~~~I                                                 0
            1938          1940          1942   1944    1946      1948   1950        1952         1954
S/20/51
No.577                                                                     I. B. R.D. - Economic Dept.
                                                                                                                                                                                                                                EGYPT
                 INDEXES: WHOLESALE PRICES, MONEY SUPPLY AND COST OF LIVING
                 (1939 = 100)
          800                                                                                                                                                                                                                                   800
                   END OF MONTH                                                                               .,Y'MONEY SUPPLY

                  ~--"''''- ..........             '---         ... ---......     .... _ .. tI   ' ,- ............'-.....",,"~
          600                                                                                                                                                                                                                                   600

                                                                                                   WHOLESALE PRICES
          400                                                                                                                                                                                                                                   400
                 ....•.•..•.....•........... ..............•............. ····C05;:·'O·;.· ..............
                 ~-:::=---t---_t--dr.::-:-:-::::=::::
                                                    LIVING

                                  J                           o                J                       o                  J                                  o                  J                    o                           J
                                1948                                         1949                                        1950                                                 1951                                              1952

                 REVENUES AND EXPENDITURES
                 l MILLIONS OF EGYPTIAN POUNDS)
          200~Y-E-A-R-L~y----~I----~I----~I~---r-'---'I----~I~---,.----r-I--~I--~200


          1501-                                                                                                                                                                            ~
                                                                                                                                                                                           " .
                                                                                                                                                                                                           7
                                                                                                                                                                                                           ....                             - 150
                                                                                                                                                                                            :.;~;~         : .:·~:·.: ·.: i.:
          lOOt-
                             EXPENDITURES
                                                                                                                         ~                 .'.\.:,.:., :,~             ~.:.:'..'
                                                                                                                                                                                           :./
                                                                                                                                                                                            I::
                                                                                                                                                                                                               .'.
                                                                                                                                                                                                           .:.:.::
                                                                                                                                                                                                                                            - 100
                                        REVENUES                                                                         .!.:.':;                                                            :...
                                                                               r;.:.:              I':"'"!'
                                                                                                     :;.                                       ••                       :-~                 .',,;             ":'.•.
                                                                                                                                                                                                           ':..
           50 r- ~                                                                ~~'::             ':}                  )3;                :':'::                     /~                   :::.:          .. .                             - 50
            o       @                   I   i[!:          I   !\}            ,lif!               I .(.:            I     %'            I   i~                     l;}j                 I    :ti          I .(;;                   I I   ,   I   0
                 1940-'41 '41-'42                             '42-'43 '43-'44 '44-'45 '45-'46 '46-'47                                                              '47~48                  '48-'49 '49..!50 1950-'51

                 SUEZ CANAL TRAFFIC
           (MILLIONS OF EGYPTIAN POUNDS)                                                                                                                                                                  (MILLIONS OF TONS)
          40~~--~ ~------~----~------~----~------~----~----~IOO
                   YEARLY
                                                                                          SHIPS'NET TONNAGE~ __ - - - -
                                                                                                                                    "",,- -'
           20
                            e_ __ _                 _---------....
                                                                                                                   -----
                                                                                                              , .....
                                                                                                                        .... '
                                                                                                                                           TOTAL TRANSIT RECEIPTS
                                                                                                                                                                                                                                                50

                             e----
            O~~--~ ~------~----~------~------~------------~----~o
                        1939                '45                        '46                       '47                          '48                                '49                       '50                           '51                '52


                 FOREIGN EXCHANGE HOLDINGS
                 (BILLIONS OF U.S. DOLLARS)
            2                                      I                          t                                I                               I                                   I                                    I                       2



             I      .i:;.l:i.~';!. ~.: :.~.:;.::.:;.:";.•:' .: :.;',:.:;~.
                 ~ ~fLXt          ...                                                     !"'" ":.   u~:;~~;;\y \l:;;;V
                                                                                          ;(f.i,t;';;i%2~\\l \ Hi;;;!i!.: ~.:~~OLLA'S
                                                                                                                                                                                            STERLING BALANCES
                                                                                                                                                                                                                                            - I



            oLJ~~~'~~~~I~~~_~I~~~I~==:;~I~'::~I~I_L-L__~lJo
                       1947      1948    1949  1950                                                                                                              1951                          1952                              1953
                       - - - - - - - December-------                                                                                                             June
a/20/51
No. 518                                                                                                                                                                                       I.B.R.D. - Economic Dept.
                            STATISTICAL APPENDIX


                              gst of Table!!

                                                          Table
                                                          ..      No~

The Growth of Egypt's Population                             1
Distribution of Land                                          2

Area Under t4ain Crops                                        3
Production and Yields of Main Crops                          4
Budget Estimates for 1950/51 and 1951/52                     5
Egypt's General Reserve Fund (as of 28 February 1950)         6
National Bank of   BgJ~t,   Position as of 16 June 1951       7
The Public Debt of Egypt as of June, 1951                     8
Egyptts Main Exports and Imports                              9
Direction of Egypt's Foreign Trade                          10
                                   Tab1e~




                                                 .
                        THE GROWTH OF EGYPT'S POPULATION


      -Year of Census                                p.,opula tion in
                                                       -   -
                                                        thousands

       1897                                            9,715
      1907                                             1l,287
      1917                                             12,751
      1927                                             14$218
      19.37                                            151 93.3
      1947                                             19,092
       Estimate for
      1950                                             20,,000




Source: Gouvernement Egyptien.Annuaire Statistique de Poche, 1948.
                                -   --
                                Table No" 2



                            DISTRIBUTION OF LAND
                                    (1947)

       .
       Acres                        Area
                               (thou~cres )
                                                      Number ot Holders
                                                      •     ( thouE""'.)

       Up to 1                       815                     1,920
       1   to   5                  1,266                        586
       5   to   50                 1,811                        144
       50 to 200                     928                          10
       200 and       over          1,321                           2

                                   6,147                     2,662




Source: IvIinistry of Agriculture; Section of Bconomics and Statistics.
                                !!!ale No.3




                           AREA UNDER ~~IN CROPS
                               (million acres)


                           Cotton    ~Jheat
                                              -
                                              Corn
                                               1,,6
                                                    -
                                                    Rice         Sugarcane
                                                                   0.06
      Average 1935/39        1.9       1.4              0 .. 4
      Average 1940/44        1.1       1.7     1.9      0.6        0.08
      1945                   1.0       1.7     2.. 0    0.6         O{'l10
      1911.6                 1.2       1.7     107      0.6         0.09
      1947                   1.3       :1.7    1.7      0 .. 8      0.09
      1948                   1.4       1.6     1 .. 6   0.8         0.09
      1949                   1.8       1.4     1<>6     0.7        0.08
      1950                   2.1       1.4     1 .. 4   0.7        0.. 08



Souree: Ministry of Agriculture; Section of Economics and Statistics.
                                                Table No", 4

                                      PRODUCTION AND YIELDS OF HAUl CROPS



                     Cotton        'Wheat           Com                Rice               Sugarcane
                Produc-        Produc ....      produe-           Pro duc-          Produc-
                tion     Yield tion Yield       tion    Yield     tion     Yield    tioD       Yield
                (thous: (kg;j TthOUs <: {kg.7   (thOUs .-u;:g;;   {thous. ( kg,,7   (thous.    ( thous
                 metric acre)   metric acre)     metric acre)      metric acre)      metric      kg./acre)
                 tons)          tons)            tons)             tons)              tons)

Av .. 1935/39    410     225      1245    853     1610     1005     673     1440      2277       32.9
Av. 1940/44      270     232      1200    703     1442      779     731     1192      2435       27.8
   1945          224     230      1185    686     1694      870     848     1288      a? 46      26.,5
   1946          275     217      1155    703     1414      830     907     1294      2533       26 0 5
   194'7         288     220      1050    617     1400      840    1228     1541      2714       28.0
   1948          400     267      1080    687     1400      876    1287     1560      2502       26.4
   19t~9         392     223      1170    791     1246      807    1141     1559      2263       25.5
   1950          383     187      1020    714     .J.302    867    1199     1662      2529       29.9



Source:    l1inistry of Agriculture; Section of Economics and Statistics.
                                   , Table No., 2




                                     ,IJeceipte:

Land tax
Tax on movable property and income
 trom work                                          1402           15.7
Excess profit tax                                     7.5           4co
Tax on general income                                 2.0           7~O
Stamp duty                                            2.,           4~0
Inheri tance tax                                      leO           )(>0
Transfers tax                                         1&9           209
Customs                                             86~1          107~0
Railways and P.T.T.                                 18 .. 4        18.6
Public domain                                        1 80           2«>0
Revenue from Mineral wealth                           2.0           2 ..,0
Revenue from industrial establishments                4.6           4..5
Extraordinary receipts                                8.. 0         1.6
Special sources tor subsidising cost of
 living       ,
Others
From suspense account to cover deficit
 in cost of living subsidy                          3eO
                                                   -  -
                           Total                   180 0 9        212.4

                                   Expenditures
Public Debt                                          5<>8           5,,9
Ministry of Finance                                  5.6            61>7
    II   II  National Economy                        1.7            1.7
    "    11  Trade and Industry                      2., 7          2.4
    II       Education
         " Health                                   2)(10          29 0 0
    II   If
                                                     7.7            8.8
   II    fI
             Interior                                8.6            9.2
            Municipalities & rural
    "    II

            problems                                 6.5            4.8
   II
         "   Justice
         n Public Works
                                                     )"l            3.4
   fI
                                                    15 ..l         18c>7
   if    II Agriculture                              4"l            SeO
   It    n Com.vnunication                          20 a O         22.9
   It    II War and Barine                          46"l           48.5
   n                                                                4,,7
         " Social
Pensions and
                    Affairs
              Allowances
                                                     2.()
                                                     4.6            4.9
Cost of Living bonus                                26 0 0         27.0
Subsidies reducing the .cost of living               8.0           19.4
Other expenditures                                  15 .. 3         8..0
                           Total                   '20,09         231.0

~, Marchl, 19S0   '""'!'   Februa!'y 28,1951
y  July 1, 1951    .. June      JQ:I 1$52
                                            Source: N.B.E. Economic Bulletin Vol IV
                                                    No.),. 1951
                                      Table No" 6
                                     - w




                              EGYPT'S GENERAL RESERVE FUND
                             -ras of   28 February   i9~



                                                      (in millions of LE)

     .
Free Reserves

         NO$iearmarked
         Earmarked for Five Year Plan
            tI      "budgetary deficits
                           (1950/51, 1951/52)
                           covering the difference
           "          tI
                           in the gold value of
                           the LE in the sub-
                           scriptions to the    ~N
                           and IBRD
           II         U-   Other purposes




Blocked Reserves
."


     Government participat.ion in agri-
     cultural bank, advances and sundry
     accounts
     Subscriptions to IMF and lERD
     Government participation in
     industrial bank and other advances



                           Total Reserve Fund




Source:         Expose of the Egyptian l'1inister of Finallce to the
                Chamber of Deputies on June 4, 1951.
                                                                     .Tab1.§..B..Q~

                                                        l'TATIO;7A! I3AJ'K 0.,' EG·YTT
                                                  T'\~ I                               /--J-U·-:··-."
                                                               rTlI (Y~'.'i-A'"~-O;:"--l
                                                                               ~jj.O           _'.     0 ~1
                                                                                                      1"".)
                                                  .Cd.l.
                                                  ------Ti-;,-i~)----                         -- -- --
                                            L§_JULY:__ ...P_E_l:~.I"L.T_l5_ELr-1
                hl~]J~j.§ilJi                                                                                   !.a§l'~

Notes issued                                   181,000,000                              Gold                                        41,051,682
Reserve                                       __11.,2§.Q.t.212                          :B~gyntian and Foreign Government         ..1,51..l1Q5hQJO
                                                                                            Treasury Bills and Securities
                                                192,760,712                                                                        192.760.712

                                       :s   A i>' K I    1.'    G __ lLr;_I:_l.L1L.T_r~.f_L.l

Share Canital
(300,OOO fully paiil shares of LE 10 each)        3,000,000                             Eg~'Ptian   and Foreign Government Treasury
                                                                                          Bills Securities and Securities
                                                                                          .g"Lls.ranteed by the Egyptif'.n Govern-
                                                                                          ment                                      171.959,768
Reserve Fund                                      J,ooo,OOO                             Sundry Securities                                73S~562
Eg:rptiar< Government                            39,104,999                             Gold                                          3.309,262
  II          II (Sr,ecial Treasury Bills                                               Advances to B:'1.nks in Ep:ynt                   800,000
                  Account)                       50,000,000                             Other advances                                8,'281,722
Sudan Government                                  7,522.735                             Bills discountec                                 736,705
Banks ip Egypt                                   60,5(\S,076                            Foreign BlJnkers and Correspondents
Current deposit ano. other accou:rts             81,286,459                               and money at cl'I.11                       50,341,941
ohe cks payabl e                                    248,432                             Sunury other accounts                         1,200,244
Sundry other accounts                             3.350,673                             Buildings                                        100,000
                                                                                        Cash                                         10 ,633.170
Oontra Accounts                               ~221.!~~                                  Contra Accounts                            -22,393.!2~

                                                271.494,915                                                                        271.494.915


SOURCE:   National Bank of      Eg~t
                                                                         .



                                                                       T§-ble lTo.:.J}

                                                         .'I'.!;tEJ.!JI?LIC l'E:BT~~
                                                              ~F JmJE.:.~ 1951


-----------------------------_._-_._-------------------------,               ---                   - -----                     . ----,--------
      Name of Debt                   Redeemable by            Amount               Sinking Fund         13~lance         _~!vi.~ _ _
                                                                                   until June 1951      outstanding          Sinkine~    Interest
                                                                                                                         ]'tmd           (:Budget
                                                                                        1951/2)
 --------,--,--------------------                -------------------------------------------
                                                        J..;J:!j LE
                                                                 T~'
                                                                          LE     LE      LE
 I - National Loan (1943 )
        (a) Long-term 3-1/~            20-30 years
                                     (Le. 1963/73)      66.997.970 )11                                                   (1.339.960      2,177,533
                                                                   )               14. 766,0603./      63.235.790        (

                                                                        ~
        (b) IvlidtUe-term                                                                                                (
             2-3/l$fo                  12-15 years                                                                       {
                                     ( 1. e. 1955/58)   11 , 003, 880 )~/                                                (     600,000     302,621

II - Loan for Palestine (1949)
     (a) Long-term ~         20-30 years
                           (i.e. 1969/79)               15,000,000                       632,595       14,367,405              315,000     450,000

        (b) Midcl.le-term 2-1/2:1,     10-12 years
                                     (i..e. 1959/61)~.2.20 .O~                                        ~oo.ooo                              375,2£2
                                                        108,001,850                15.398.655          92,603.195            2,254.960   3.305.154

                                                                                                                                   5.560,114
                                                        ,------------------                                  .....~---       -----------..
 11    of which IE 7,005,000 in the hands of the Government
 ~I of which LID 4,020.000 in the hands of the Government
 3./   of which about LE 3.900,000 for the middle-term.1oan
 SOUR~:      Egyptian Government Ministry of Finance
                        Table No. 9
             EGYFT'S FlinT i,XPuETS M!D E'''PORTS

                        Lain Exports


                                         (Value in million IE)


Ray" cotton
                                1948
                                -....-

                                113.2
                                                  - 1949
                                                    106.0
                                                                 1950
                                                                 -
                                                                 1h9.7
Rice                             16.0                14.4          7.6
Cot ton ~ra:rn                                        1.8          203
Unions                            1.6                 1.2          2.0
Eazout &. diesel oils             1.2                 2.3          1.5
Phosphate of lime                 0.7                 0.3          1.0

                        Vain Imports
                                         (Value in million LS)
                                1948                19u9          10:::'()
                                                                  c4_/~,!'-J




Cereals                        21.4                 18.1         20.9
J<iachinery                     B.o                 20.8         20.2
Fertilizers                     7.9                 11.4         12.4
Gold and coins                  5.1.i               12.7         18.1
Petroleum products              B.l                 10.0            8.J
                                                                      q
Cotton yarn and piece goods     6.0                   4.7          5.8
Tea and coffee                  6.0                   7.8          8.6
Timber                          3.8                   7.6          7.8
Hav[ wool and woolens           8.3                   7.3          9.9
Ltotor cars and spare parts     5.3                   6.8          6.5
Iron and steel bars and sheets 4.6                    5.6          5.. 7
Tobacco and cigarettes          5.0                   5.2          5.6

.Source: rr.B •.E. Economic Bulletins 1949-1951
..    ...
                                                         "                                                                   ...
                                                                                                                                        "




                                                          ~J?l§l..~.9.:....lQ


                                            DIMQ.TlQl\T OF_EQ...y£!.,!.§..FORBlm!_TRM)]

                                                (in percentap'e of total values)
                                                    ,             '




     Country of
     origin or                     "1.931________       _. ___J .         ______
                                                                      .2~.§
                                                                                    ----- 1.2..4
                                                                                               -.2----"'.,_.-
                                                                                                                _ __.J2.i2-____
     destina.tion           Exnorts     Imports         Exports           Imports   Exnorts       Imnorts       :"::xports   Imnorts

     U.K.                     31           22                29               21       17            22            21              21
     India                     5                             16                4       20              3           12              3
     France                   11            5                10                5        8              6            8              9
     Italy                     6            9                 4                9        8              9            9              8
     u. S.A.                   7            6                 3                7        ~
                                                                                        -'             9            9               5
     U.S.S.R.                                                 8                4        3                           5               6
     Germany                   8           n                 1                          4                           3               3
     Belgium-Luxembourg                     6                                  6                       3                            2
     Australia                                                                 2                       5                            7
     Japan                     6                              4                         2                           3
     Others                   26           41                25               42       35            43            30              36



     Compiled from various sources