e refugees had returned. Growth
was held back in 2003 by extensive drought and the gradual winding
down of the international presence. The country faces great
challenges in continuing the rebuilding of infrastructure,
strengthening the infant civil administration, and generating jobs
for young people entering the workforce. One promising long-term
project is the planned development of oil and gas resources in
nearby waters, but the government faces a substantial financing gap
over the next several years before these revenues start flowing into
state coffers.

Ecuador
Ecuador has substantial petroleum resources, which have
accounted for 40% of the country's export earnings and one-fourth of
public sector revenues in recent years. Consequently, fluctuations
in world market prices can have a substantial domestic impact. In
the late 1990s, Ecuador suffered its worst economic crisis, with
natural disasters and sharp declines in world petroleum prices
driving Ecuador's economy into free fall in 1999. Real GDP
contracted by more than 6%, with poverty worsening significantly.
The banking system also collapsed, and Ecuador defaulted on its
external debt later that year. The currency depreciated by some 70%
in 1999, and, on the brink of hyperinflation, the MAHAUD government
announced it would dollarize the economy. A coup, however, ousted
MAHAUD from office in January 2000, and after a short-lived junta
failed to garner military support, Vice President Gustavo NOBOA took
over the presidency. In March 2000, Congress approved a series of
structural reforms that also provided the framework for the adoption
of the US dollar as legal tender. Dollarization stabilized the
economy, and growth returned to its pre-crisis levels in the years
that followed. Under the administration of Lucio GUTIERREZ, who took
office in January 2003, Ecuador benefited from higher world
petroleum prices, but the government has made little progress on
fiscal reforms and reforms of state-owned enterprises necessary to
reduce Ecuador's vulnerability to petroleum price swings and
financial crises.

Egypt
Lack of substantial progress on economic reform since the mid
1990s has limited foreign direct investment in Egypt and kept annual
GDP growth in the range of 2-3 percent in 2001-03. Egyptian
officials in late 2003 and early 2004 proposed new privatization and
customs reform measures,