Newspaper article The Christian Science Monitor

Egypt's Strapped Economy Hit Hard by Gulf Standoff

Newspaper article The Christian Science Monitor

Egypt's Strapped Economy Hit Hard by Gulf Standoff

Article excerpt

LURED by exotic images of pyramids and ancient temples, tourists descendedon Egypt last year in record numbers. The $2 billion they left behind has beenone of the main props holding up Egypt's sagging economy.

Last month, Saddam Hussein kicked it out.

Following the Iraqi president's invasion of Kuwait, gloomy Egyptianofficials are predicting a major drop in tourism as the Middle East once againbecomes the scene of conflict and crisis.

And tourism is only the beginning for this hard-pressed nation, which hastaken its place in the front ranks of countries resisting Iraq - and has begunto pay dearly for it. If estimates cited last week by President Hosni Mubarakhold true, the Gulf crisis could cost Egypt $2 billion in lost revenues andadded expenses in one year alone.

"Egypt is taking tremendous risks on the economic level," says an Egyptianofficial. "The risks should not be underestimated."

"The Gulf crisis clearly has important effects on Egypt's economicsituation - and they're mostly negative," concurs a Western economist inCairo.

For its trouble in supporting United Nations sanctions and United States-ledmilitary operations against Iraq, Egypt has also had some good economic news.

Concerned about serious new pressures on Egypt's economy, President Bushsaid he would ask Congress to forgive Egypt's $7 billion military-aid debt tothe US. A delegation of US congressmen visited Egypt over the weekend.

The US also agreed last weekend to give Egypt $163 million in cash - $48million more than last year - as part of its annual $815-million economic aidpackage.

Meanwhile, Mr. Bush has dispatched Secretary of State James Baker III andTreasury Secretary Nicholas Brady to Europe, the Middle East, and Asia to roundup financial support for Egypt and other poor countries that have made financialsacrifices to support the international trade embargo on Iraq.

In addition to the expected decline in tourism, Egypt may lose up to $1billion in remittances from an estimated 1 million Egyptian workers fleeing Iraqand Kuwait. Thousands more workers in the Gulf and Jordan may choose to returnhome if the threat of war continues.

The stream of refugees could easily double the number of Egyptians enteringthe work force in the next year, to more than 1 million. Unemployment in Egyptalready runs as high as 20 percent, while underemployment is widespread. Inaddition, the government will face the high cost of housing and educating thereturning workers.

The Gulf crisis also threatens another big revenue earner for Egypt, theSuez Canal. Last year, increased traffic produced $1.3 billion for Egypt. Butofficials worry that with trade reduced because of the embargo on Iraq, and withmaritime insurance rates tripled on shipping bound for the Gulf, the number oftransits may drop off significantly. …

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