Two major trends occurred in the composition of merchandise imports. The first trend was the decline in the late 1980s in the value of capital and intermediate goods (e.g., industrial and agricultural inputs). For example, the value of capital goods imports in 1988 was 14 percent less than it was in 1985. While capital goods and intermediate goods imports dropped in absolute value, however, their share of total imports grew. Nevertheless, the decline in the absolute value was likely to have an adverse impact on the development of such sectors as industry and agriculture.

The second trend was the continuous increase from 1979 to 1985 in the share of food and agriculture in the import bill. The increase began in the 1970s, as the result of a combination of population and income growth and the unsatisfactory performance of agriculture. The trend persisted through the 1980s, until food became the fourth largest item in the import bill. Not all the value of food coming into Egypt, however, appeared in foreign trade accounts, because a large proportion of the wheat came as grants, especially from the United States. Hence, the import figures seriously underestimated the value of imported foods.

Overall, merchandise imports rose rapidly after 1975, mainly because of the big rise in world oil prices, which gave Egypt more purchasing power, and because of the liberalization of import policy. In FY 1983, an election year, merchandise imports approached US$10 billion. The government subsequently reintroduced some restrictions on private-sector imports. These measures, together with the general scarcity of foreign exchange in commercial banks, led to a leveling off of imports and then to an actual decline.

The value of imports since World War II has consistently exceeded that of exports, and a chronic trade deficit has marked Egypt's foreign trade. The deficit nearly doubled between 1979 and 1985, growing at an annual rate of about 11.8 percent. The growth of the deficit slowed considerably after the 1985-86 collapse of oil prices and the concomitant drop in imports. In 1987 the deficit reached about US$4.4 billion, and it climbed again in 1988 to nearly US$5.9 billion.

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