but the government is likely to pursue
these initiatives cautiously and gradually to avoid a public
backlash over potential inflation or layoffs associated with the
reforms. Monetary pressures on an overvalued Egyptian pound led the
government to float the currency in January 2003, leading to a sharp
drop in its value and consequent inflationary pressure. The
existence of a black market for hard currency is evidence that the
government continues to influence the official exchange rate offered
in banks. In September 2003, Egyptian officials increased subsidies
on basic foodstuffs, helping to calm a frustrated public but
widening an already deep budget deficit. Egypt's balance-of-payments
position was not hurt by the war in Iraq in 2003, as tourism and
Suez Canal revenues fared well. The development of an export market
for natural gas is a bright spot for future growth prospects, but
improvement in the capital-intensive hydrocarbons sector does little
to reduce Egypt's persistent unemployment.

El Salvador
With the adoption of the US dollar as its currency, El
Salvador has lost control over monetary policy and must concentrate
on maintaining a disciplined fiscal policy. GDP per capita is
roughly only half that of Brazil, Argentina, and Chile, and the
distribution of income is highly unequal. The trade deficit has been
offset by annual remittances of almost $2 billion from Salvadorans
living abroad and external aid. The government is striving to open
new export markets, encourage foreign investment, modernize the tax
and healthcare systems, and stimulate the sluggish economy.

Equatorial Guinea
The discovery and exploitation of large oil
reserves have contributed to dramatic economic growth in recent
years. Forestry, farming, and fishing are also major components of
GDP. Subsistence farming predominates. Although pre-independence
Equatorial Guinea counted on cocoa production for hard currency
earnings, the neglect of the rural economy under successive regimes
has diminished potential for agriculture-led growth (the government
has stated its intention to reinvest some oil revenue into
agriculture). A number of aid programs sponsored by the World Bank
and the IMF have been cut off since 1993 because of corruption and
mismanagement. No longer eligible for concessional financing because
of large oil revenues, the government has been unsuccessfully tryi