Caution is the watchword.

Position:Egypt's economic development - Business and Finance

HOSNI MUBARAK's re-election as Egypt's president for a third term last October was a formality -- perhaps, says his critics, a bit too formal to sustain credibility. But although Mubarak spared himself the irritation of opposition candidates and the result was a foregone conclusion, he campaigned hard to deliver a reassuring message to the public.

Mubarak has some firm grounds for instilling optimism. Progress on economic restructuring under the first two stages of the IMF and World Bank reforms has surprised sceptics. Between 1990 and 1992, inflation was halved to about 12%, the budget deficit was cut from more than 20% of gross domestic product to 4.7%, foreign currency reserves rose to $17bn and the exchange rate remained gratifyingly stable.

Other economic pointers are equally encouraging. According to the 1991-1992 annual report of the Central Bank of Egypt, the current account surplus grew from $1.39bn to $3.76bn. This was achieved despite a small decline in oil exports because of lower oil prices, which was offset by a growth in invisible payments and a surge of workers' remittances from $3.78bn to $5.47bn.

In the light of these results, Mubarak may be justified in emphasising continuity as the watchword for economic policy. The president has declared economic reform, security, social justice, unemployment, improving education, slowing down the growth of population and paring down the huge state bureaucracy as his principal goals.

The sheer length of items of the agenda is a reflection of the enormous challenges which face the government. It would be harsh to denigrate the progress that has been made, though it does pale in comparison with the task ahead. Major structural reform is still required and Mubarak's slowly, softly approach is not enough in the eyes of many economic analysts.

One example is William Quandt of the Washington-based Brookings Institution, who was quoted by the London Financial Times as saying "Mubarak's cautious style, which served him well in the 1980s, is still a very cautious style and may not be right for the 1990s ... There are many who hold the perception that things are now changing too fast for him."

A quarter of Egypt's population is forced to live on less than $35 a month, according to the World Bank. The government admits to an unemployment rate of 20% of the labour force, but some observers reckon the true figure is twice as high. The stifling dominance exercised over the economy by the public...

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