Policies were developed that made it possible for Egypt to trade with other countries as well as improve its economic situation. Egypt conducts trade with other Arab countries but it has embraced the goods and services that are produced by western countries so as to enhance its trade. Other than the Middle Eastern countries, Egypt exports goods to Italy, United States, United Kingdom and Germany. Nowadays, majority of its imports come from Germany, Italy, United States of America and France.
Therefore, the primary countries that Egypt trades with are Germany. Italy, the United States and other Asian countries like S. Korea and Japan. Is Egypt in a trade deficit or prosperity at this point and time? At this point in time, Egypt is operating at a trade deficit. The introduction of foreign aid to pay debts the country owed other countries and the open-door policy gave raise to the deficit problem. This is because the countries exports did not yield the expected returns as they ought to and imports increased as this trade was not restricted.
Over the years they have tried to solve the problem but the government still continues to subsidize some of its commodities especially food and fuel. Thus they are increasing their spending instead of cutting down and this is not helping much in solving the problem. In addition, there have been corruption allegations and this means that the funds they get through aid are not used as they are supposed to. Such scenarios are increasing the trade deficit instead to reducing it. MONETARY SECTION What is the current monetary system?
Egyptian pounds (LE?) and piastres (EGP) are used in the exchange of goods and services and they represent the country’s currency. 100 piastres make a pound. This has evolved from the use of banknotes and gold in earlier years. The current monetary system The banking system is used as it enhances trade in the region. The government through the Central Bank of Egypt controls the way in which the banks operate and also how money circulates in the economy. This is because they will form and implement monetary policies that influence the rates of interest which determine the amount of money that is in circulation at one time.
This means that they control the levels of inflation which can affect businesses as well as individuals. “This is because when businesses shut down because of less money and recession, then people will be unemployed and they will not be able to purchase commodities (Handy & IMF, 1998). ” The central bank therefore ensures that the inflation rates are kept constant so that the economy is stable. It also foresees that the decisions passed are in line with the country’s objectives, vision and goals. What role has the FDI played in the recent monetary development of Egypt
Foreign Direct Investment (FDI) involves the investment made by a company in another country other than their own. Egypt being a country with a competitive workforce, located in an area that is endowed with natural resources, a rich culture and companies with growth potential, such qualities have made it attractive for businessmen from other countries. FDI therefore, has continued to play a major role in the economic progress of Egypt. FDI has enabled businesses to grow because they have the necessary capital that they need to ensure that they meet their expenses.
Many people who were unemployed now can work in various businesses and the projects which were stagnant have progressed. The government has also benefited because they get money from such establishments which they use to pay off their debts. “It has been useful to the people because it has enabled them get them access goods that other countries use on time and they do not have to rely on imports(Eur, 2002). ” This has definitely improved its balance of payments. FDI is further made attractive by making the locals as well as foreigners assured of their rights and privileges and this is written in the law.