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Medium Term Strategies for Achieving the Millennium Development Goals In Egypt

Motaz Khorshid, Hans Lofgren, Ahmed Kamaly and Sohair Abou El-Eenein

No 3395, EcoMod2002 from EcoMod

Abstract: This paper aims primarily at assessing development strategies to achieve the Millennium Development Goals (MDGs) in Egypt. It is based on the outcome of a regional research project directed to evaluate development strategies to achieve the MDGs in the Arab Countries. Reports on the progress of Egypt toward the achievement of MDGs show that the government of Egypt continued to give attention to critical areas of development, such as health, education, access to water and sanitation as well as improving the livelihoods of the most deprived segments of the population. However, the pace of progress varies among the goals: it is fast and sustained in some areas (child and maternal mortality and water), acceptable in others (sanitation, education and poverty reduction), and somewhat slow in some others (women empowerment and environmental protection). In addition, Egypt will have to increase its efforts and investments in order to keep the current rate of progress with respect to some specific indicators (in the area of poverty, mortality rates, and combating major diseases). Egypt's population growth is one of the main challenges to achieve the MDGs. Egypt ranks as the 16th most populous country in the world and the annual population growth rate is around 2 percent. If this population growth rate persists, Egypt's population is expected to reach 83 million by 2015, thus putting a considerable strain on the country's ability to sustain progress towards achieving the MDGs. Because of the relatively advanced stance of Egypt in most of the MDGs, Egypt is unlikely to face major problems toward the achievement of its MDGs targets nationally. However, on a regional level and across genders given the stark disparities between different governorates and gender, a number of MDGs are very difficult to achieve on a regional level and across gender. In order to evaluate alternative policy measures and strategies for achieving the MDGs in 2015, the following methodological steps have been accomplished. First, an issue-specific social accounting matrix (SAM) was constructed to form a consistent and comprehensive analytical framework for modeling and policy analysis. The SAM was designed to capture the particular structural features of the Egyptian economy with special reference to the socioeconomic data relevant to the millennium development goals. Second, an extended dynamic computable general equilibrium (CGE) model - with a satellite sub-model to analyze the millennium development goals – has been constructed and tailored to the Egyptian socioeconomic data. Third, the constructed accounting framework, collected information and similar studies on Egypt were used to determine the structural parameters and technical coefficients needed to calibrate and run the extended CGE model and generate output results. Fourth, recent economic performance of the Egyptian economy was used to validate the results of the extended dynamic CGE model. Finally, a number of scenarios were simulated to generate a reference path (or baseline) for the Egyptian economy and, based upon changes on this path, the model is used to assess the impact of alternative strategies for achieving the MDGs. The reference path run is mainly directed to project the medium-term economy-wide indicators of Egypt up to 2015, assuming that the government is continuing to rely on the policy measures and strategic trends applied in the 1990s and the beginning of the twenty one century. Based on the results of this reference path scenario with respect to the achievement of the MDGs, alternative policy measures were formulated and tested. In light of the current performance and structural features of the Egyptian economy as well as the adopted development policies and directions, two policy measures to finance the MDG objectives were experimented. The first policy assumes that the Egyptian government would further rely on domestic borrowing – in the form of treasury bills and other government domestic financial instruments –to ensure the financing of the cost related to the achievement of MDGs. The second policy assumes that the Egyptian government would have access to foreign grants (or transfers) directed to reach the aspired MDG indicators. In addition to the specific MDG achieving policy, MAMS was used to test alternative economic growth scenarios and their impact on MDG indicators. In this respect, two economic growth scenarios were tested, for which the two aforementioned policy scenarios were generated. Firstly, an optimistic scenario based on the government indicators reflected in the follow-up reports of the five year plan as well as other official government documents. Secondly, a moderate economic growth scenario which assumes that the Egyptian economy will take more time to overcome the effects of the financial crises is tested. The main finding of the reference path scenario with respect to the MDG indicators is that in both the optimistic and moderate economic growth scenarios most MDGs would be achieved on the macro level, or even overachieved in some instances. This is excluding the poverty goal (MDG1) and, to some extent, the goals of access to improved sanitation (MDG7b) and the attainment of universal primary education (MDG2) as defined by the on-time primary completion rate. The paper concluded that the analysis of the Millennium Development Goals (MDG) in Egypt based on the extended CGE model has generally confirmed that it is possible to achieve most of the MDGs on the aggregate socioeconomic level in 2015. The business as usual (BAU) or the reference path scenario has succeeded to generate satisfactory results on the macro-level via achieving the MDGs 4, 5 and 7a. The economy-wide analysis using the extended CGE model suggested also that the MDG indicators are not too sensitive to changes in alternative strategies to finance the achievement of the MDGs. The general conclusion in this respect is that the policy maker in Egypt is advised to target all the unrealized MDGs (which are MDG2 and MDG7b in the Egyptian case) and avoid concentrating on achieving - or delaying the targeting of one of them - with the objective of reducing the associated financing cost. Based on the results of MAMS, a considerable increase in government expenditure on water and sanitation sector is required - in most of the adopted strategies to achieve both MDG 2 and 7b – in order to reach a yearly increase in the real GDP of this sector from 5.1 percent in the base run (BAU) to 6.9 percent annually during the period 2008-2015. Real GDP of health and other government services need to witness also a slight increase in order to cope with the MDG achievement process. Finally, the government of Egypt should direct additional investments to the labor intensive industries to timely achieve MDG2 and MDG7b objectives in 2015. The analytical results stress also the need to augment real government spending on infrastructure from 4.5 percent per year in the base run to around 4.7 percent in the MDG policy scenarios. When measured by the additional government borrowings, the amount of domestic interest payment to the private institutions has to increase – as a percent of GDP – from 6.1 percent in the base run to about 6.6 percent in case of the optimistic growth scenario and to nearly 7 percent in case of the moderate growth scenario. The above changes in the expenditure items and economic aggregates can be easily converted into a set of current and capital government spending measures. It should be noted nevertheless that the same indicators on the regional or governorate level reflected a clear duality between urban and rural areas with respect to the achievement of the MDGs. Unfortunately, analytical model is not disaggregated enough to zoom on certain regions and groups which are likely need policy interventions. In this respect, MAMS does not support any disaggregation between rural and urban, male and female nor between governorates. This limitation makes the model misses an important dimension in the MDG analysis for the Egyptian case. Another limitation is that the model does not represent an appropriate tool for targeting the poverty issues. See above See above

Keywords: See above; General equilibrium modeling (CGE); Developing countries (search for similar items in EconPapers)
Date: 2010-01-01
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