Egypt’s Financial Liberalisation: Why Didn’t It Do What It Said It Would On The Box?

Since 1991 Egypt has undertaken economic and financial liberalisation under an International Monetary Fund (IMF) led structural adjustment and economic reform programme known as ESRAP. This paper zones in on financial liberalisation under this programme, examining the structure of Egypt’s banking sector, domestic credit and financial access. It is seen that postliberalisation, while private banks have grown, as has credit, stock market activity and direct investment flows, this improved financial depth and access has been limited to Egypt’s well-connected elite class and not the wider private sector or the household realm. This is a function of weak economic rationale for financial liberalisation such that it leads to vulnerability, exposure to volatile capital flows and liberalisation’s flimsy theoretical foundation that is built on the notion of an efficient market and the impossible trinity of sovereign monetary policy, exchange rates and capital mobility. Furthermore, liberalisation reforms gloss over domestic context including societal structure that spans integrated and non-integrated members and other elements of political-business kinship. A combination of these facets has meant that neither has financial liberalisation eradicated imperfections nor resulted in a free flowing circuit of capital for all segments of Egyptian society, hence better mobilisation and allocation of capital, savings and investment is still craved.