Investors will be closely observing over the coming months the degree to which the Government implements a more flexible and market-responsive exchange rate regime as part of a comprehensive economic strategy. Trends in the balance of payments have driven much of recent GOE economic policy. Concerns regarding trade and current account deficits prompted the GOE in 1998 and 1999 to tighten trade financing, tightly manage the local supply of foreign currency, emphasize export growth and implement measures to moderate import growth. Increasing exports, aided by higher oil prices, accounted for this improvement. Import payments recorded a slight upturn.
Tourism is Egypt's top foreign exchange earner.
Suez Canal revenues lack the growth potential of the tourism sector. Competition from alternative routes, oil pipelines, a decrease in the number of car transports, and the effect of the East Asian economic downturn are among the factors squeezing canal revenues. To encourage the use of the waterway, the Suez Canal Authority has experimented with new pricing policies and has plans to deepen the canal to accommodate super tankers. In addition, the GOE is seeking to capitalize on the strategic location of the Suez Canal through the Port Said East development project, an initiative that includes the development of deep-water ports and a free trade zone and industrial city. Its contribution to GDP and to export earnings has varied, of course, with trends in world oil prices.