Abstract

The process of economic development in Egypt cannot be described as a successful one, especially during the first decade of the 21^th century. In spite the high economic growth rates achieved in some years during the considered time period; however, this time period has witnessed high rates of unemployment, inflation and poverty.

Where the efficiency of financing the process of economic development is considered the main determinate of the success of this process in any economy, as it permits the economy to grow while maintaining the two evils of any economy, unemployment and inflation, at safe and stable rates; this calls for studying the efficiency of financing the development process in Egypt and its main constraints.

Although the level of saving in Egypt is weak and tends to deteriorate overtime due to low levels of incomes; however, the main constraint in the process of capital formation is the inefficient use of those savings rather than their size.

Where financial system is the main responsible for the efficiency of mobilizing and utilizing savings in any economy; then this study focus on studying the efficiency of the Egyptian financial system on achieving economic development goals. The study revealed a number of weaknesses regarding efficiency of the Egyptian financial system as follows:

-            Egyptian financial system plays insignificant role in attracting portfolio investment flows.

-            Egyptian financial system plays insignificant role in enhancing the efficiency of utilizing savings.

-            Egyptian financial system may direct a considerable amount of savings to conspicuous consumptions and other unproductive uses.

-            There is an evidence of spread of the informal financial sector in the Egyptian economy.

The study indicates another constraint to the process of economic development which is the ability to mobilize and use foreign exchange. On one side, lack of foreign exchange leads to inability to obtain foreign intermediate and capital goods that are necessary for economic growth; on the other side, lack of foreign exchange leads to devaluation of Egyptian pound which considered the main cause of inflation in the Egyptian economy.

In general, it can be said that the Egyptian financial system has failed to achieve economic development goals.

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