Bank officials said that Egypt's balance of payments was in much better shape than had been feared. This was because of a relatively swift recovery of tourism, increased non-oil exports and a sharp cut in imports. The current account deficit for fiscal 2001/02 (June-July) was only $8 million, and the overall payments deficit was $446 million, significantly lower than in each of the three previous years.

The bank had presented its lending programme as being in support of government reforms, in particular to the trade sector. Wolfensohn said the government had made good progress in many areas of reform, notably education and health, but the key challenge now was to engineer an increase in the rate of economic growth.

'Egypt is, like the rest of the world, part of a broad consensus on what needs to be done, and I think that all that needs to be done now is to act,' he said after a 14 October meeting with President Mubarak. 'But the fundamental question you have is less the social programmes but getting growth in the economy. You don't get improvements unless you have growth and your growth has diminished, along with the growth of the rest of the world.'

The Egyptian economy registered rates of growth of 5-6 per cent a year in the late 1990s, but this has since fallen to less than 3 per cent.

The most recent figures issued by the Central Bank of Egypt show that foreign exchange reserves dipped by almost $400 million in the first month of fiscal 2002/03, to $13,837 million. Net foreign assets have also fallen steadily, to $2,000 million at the end of July, compared with $7,600 million in December 1998. Further depletion of reserves could prompt the government to review its position on the possibility of borrowing $1,000 million from the two development banks, analysts say.

The Wolfensohn visit came as the central bank was putting the final touches on a new monetary policy programme, expected to focus on ways to lower domestic interest rates and introduce more flexibility into the exchange rate system.

Exchange rate: $1=£E 4.65