The Impact of Exchange Rate liberalization On Foreign Trade in the Egyptian Agricultural Sector

Exchange rate developments have a significant impact on the Egyptian foreign trade; especially in the agricultural sector, in a way that required assessment and investigation. In this research, we attempt to measure the impact of recent exchange rate developments through measuring the efficiency of total foreign trade and agricultural trade (imports and exports) during the period (2003-2018). Our results indicate that exchange rate changed by around 72.87% following the revolution in 2011. This indicates a devaluation in the Egyptian national currency as a result of the revolution. However, this devaluation had a positive impact on the Egyptian commodity exportsthat increased by around 38.53 % Indicating the positive impact of the revolution. On the other hand, the total value of imports increased by around 96.96% during the same period which indicates a strong negative impact of the devaluation on imports. These changes reveal the widening the gap in the trade balance during the mentioned period. The gap widened by around 264.92%. Exports coverage to imports changes by around 56.43 during the period (2003-2010) then to 38.75% during the period 2011-2018.
Total exports of agricultural products changed by around 41.3% which reveals a positive impact of the revolution on the agricultural exports. Pre-devalutaion total exports amounted around 2399 billion dollars and increased to around 2676 billion dollars; with a total increase of 11.5%. This increase is a result of the devaluation.  Total agricultural imports changed by around 73.2%, indicating the negative impact of the revolution on the increase of the total value Imports of agricultural commodities and thus increase the gap in the agricultural trade balance.The agricultural trade balance gap increased by around 68.3% which reveals the negative impact of the revolution. According to the estimated aggregate agricultural exports model, an increase in exchange rate by 10% leads to an increase in total exports by around 5.86%. the positive relation between exchange rate devaluation and total exports is consistent with economic theory. Our estimated imports model shows that if exchange rate changes by 10% this leads to a decrease in total Egyptian imports by around 10.62%, thus increasing the balance of trade balance. This is also consistent with the economic theory. The rate of change in the exchange rate indicates that if the exchange rate of the US dollar against the Egyptian pound increases by 10%, this will increase the agricultural exports by 0.54 which is also consistent with economic theory. The rate of change in the exchange rate indicates that if the exchange rate of the US dollar against the Egyptian pound increases by 10%, this will lead to a decrease in total imports by 0.987%, thus increasing the balance of the trade balance. Finally, If the exchange rate of the US dollar against the Egyptian pound increases by 10%, the balance of agricultural balance will rise by 0.876%, thus increasing the balance of trade balance.
Our model revealed a positive relationship between the exchange rate as a dependent variable, total exports, balance of trade balance, agricultural exports and balance of agricultural trade balance separately as independent variables.Results also reveal an inverse relationship between exchange rate as a dependent variable and total imports and agricultural imports as independent variables. This leads to a relative decrease in trade balance and hence an increase in agricultural exports and in the agricultural trade balance