While in the first years of this century stagnant economic performance was coupled to a relatively stable political environment, the past three years of strong growth have been accom-panied by a rise in domestic tensions that are creating real difficulties for the government.

While the reforms can, in part, be credited with delivering an improvement in macro-economic performance, the promised benefits of liberalisation are failing to trickle down quickly enough to the wider population.

The challenge facing the government has been highlighted by the deaths in March of several people queuing for bread after the government cut bread subsidies just as global wheat prices peaked.

A series of emergency measures have been put in place to alleviate the crisis, and the 2008/09 draft budget includes an increase in both wages and subsidies.

But with Egypt reliant on wheat imports, the rise in global food prices has put Cairo in a difficult position over its liberalisation programme, and strengthened the hand of those who would seek to maintain the National Democratic Party’s stranglehold over the country’s political life.

Special Report: Egypt - Struggling with subsidies

Index of all stories

• Governance: Pressure mounts on government
  Though the government faced civil unrest in the run-up to local elections on 8 April, political change is unlikely

• Economy: Cairo’s economic dilemma
  The government’s reform plan is boosting the economy but the poor risk losing out

• Gaza: Breach reveals conflicting interests
  The breach of the eastern frontier by Gazans reveals Cairo’s conflicting interest

• Foreign investment: Privatisation fuels growth
  Egypt’s liberalisation policy is boosting foreign investment but more needs be done to maintain this success

• Energy: Funding the search for gas
  Cairo is raising the price it will pay to oil companies for gas to boost deepwater prospecting and sustain economic development

• Power: A shift in the power structure
  The electricity sector is set to undergo a revamp as Cairo’s privatisation drive intensifies

• Commentary: Private finance is priority for Cairo