The 1995/1996 Household Income, Expenditure - (PDF, 101 mb ...

CHAPTER III. POVERTY AND INEQUALITY
lILA Abstract l
III. 3
Using data from two Egyptian Household Income, Expenditure and
Consumption Surveys (HIECS), various profiles of relative economic deprivation
and inequality are developed and presented. Because the results are sensitive
to the assumptions and adjustments used for spatial and temporal comparison,
caveats to statistical methodology and inferences are identified. Expenditure
data are used for poverty comparisons and income data for inequality. The
nutrition-based poverty line is adjusted for household size, food-to-total
expenditures, and food-only inflation. From the perspective of targeting,
poverty rates by socioeconomic classifications are rank invariant and stable
over time. The findings are interpreted, where appropriate, relevant to
policies for alleviating poverty in the context of sectoral reform and
stabilization. A slight decline in overall income inequality over the period is
suggested, and lower quintile groups have made gains in income shares.
IILB Introduction - The Macro Environment
Some historical observations about the Egyptian macro-economy will
provide a framework for current conditions.
The 1980's were particularly difficult years. It is generally agreed that
the economys poor performance was due, in large part, to an inefficient state
bureaucracy whose pervasive controls and subsidies persisted in discouraging
competitive enterprise, and whose monetary and fiscal policies remained
inhospitable to private investment and fueled high inflation rates. By 1985 a
decade of economic growth in Egypt had ended. GDP growth fell from 5% per
year to near stagnation; inflation remained at about 25%, and budget deficits
annually approached 20% of GDP. In the late 1980's the Government of Egypt
embarked on a far-reaching program of economic stabilization and reform
largely supported by international donors, culminating in financial assistance
in the form of a standby a,reement signed with the International Monetary
Fund (IMF) in May of 1991.
The economic problems, and the policy measures proposed as solutions,
were textbook examples for macroeconomic stabilization and reform (see IMF
(1985)):
The budget deficit required a restrictive fiscal policy:
cutting expenditures and raising revenue through new taxes.
The reduction or elimination of subsidies, especially of food
staples, remained a particularly contentious component of the
1 A version of this chapter in its entirety is forthcoming in the Middle
East Economics Association, edt Research in Middle East Economics, Second
Annual Volume, November, 1997.
2 See the address by IMF's Managing Director Michel Camdessus in "IMF
Lauds Egypt's Economic Program," IMF Survey, 10 June 1991, p. 1.