| Abstract: This Country Assistance Strategy (CAS) report for the period FY02-04, initially emphasizes Egypt ' s economic growth performance, based on stabilization efforts, which allowed private sector activity, reduced inflation, implemented structural reforms in the areas of capital markets, tariff reduction, and improved social safety nets. However, concerns relate to the current effective exchange rate, which remains appreciated, to the reversal of the fiscal stance since 1999, and to the non-tradable aspects of growth sectors, which are not technology-intensive, nor largely productive. In addition, merchandise exports stagnated, compared to the average 5.6 percent per annum, of world merchandise trade expansion. Given the Bank ' s limited role in Egypt, - similar to that in most lower middle-income countries - implications for the Bank ' s involvement include the following factors: strengthened policy dialogue on the incidence of poverty, and, an assessment of the financial sector selectivity in providing knowledge management guidance in policy reform and, mobilization of financing packages for priority projects. The base case scenario, presumably the most likely, will continue the current pace of growth, and policy implementation, with a decreasing portfolio by FY04, and an Analytical and Advisory Activities program mostly focused on human, and rural development, and water management. Alternatively, the high case scenario would apply, provided structural reforms are deepened, or, if severe external environment deterioration, leads the Bank to support a credible program. Risks include external shocks, fiscal un-sustainability, and delays in implementing macroeconomic, and structural reforms. |
