Kenneth Strzepek Impact of a New MIT and UNU-WIDER Sherman Robinson Nile Basin Agreement IFPRI on the Economy of Egypt: Brent Boehlert Shared Water and BenefitsIndustrial Economics, Inc. .

Introduction Purpose of study Assess Impact of the Upstream Nile Development on Egypts economy from an economy-wide perspective Analytical tools Nile Hydrologic Model Operational model of Egyptian Water System A dynamic CGE model of Egypt that takes the hydropower and irrigation water supply from Water Model Page 2

Source of Nile Inflow to EgyptBlue Nile 59%Sobat 14%River Atbara 13%Bahr El Jebel 14%85% Ethiopian plateau15% African riparian countries Page 3

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WITHIN YEAR VARIATION Mean Monthly Nile Flow at Aswan 25.0 Winter Crops Summer Crops 20.010^9 cubic meters 15.0 10.0 Navigation Minimum Flow 5.0 0.0 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul

Allocation of Nile Waters 1959Average Annual Nile Flow 84.0Allotment to the Sudan 18.5Inflow to ASWAN 65.5Reservoir Losses (10.0)Allotment to Egypt 55.5

Hydropower Development on Blue Nile Page 7

Worst Case Impact on Egypt of Upstream Development via a New Agreement A historical 53 year record Impose the worst 5 year Drought on Record on the decades of the 2010s, 2020s, 2030s, 2040s Full Ethiopian Irrigation of Blue Nile by 2020 Rapid completion of All Blue Nile Dams & rapid filling Driest Climate Change Scenario to 2050. Equally unlikely is increased Blue Nile flows. Page 8

Nile Inflow Scenarios Page 9

HAD Lake Level Scenarios Page 10

Hydropower Production Scenarios Page 11

Irrigation Supply Scenarios Page 12

Examine Economy-wide Impacts of these Changes in Hydropower and Irrigation Supply via a CGE Model CGE models are widely applied to policy analysis Good for analysis of: policy changes affecting one sector if the feedback effects are large, making partial equilibrium analysis misleading policy changes that simultaneously affect different sectors in the economy Page 13

Schematic of EGYPT CGE Model Factor Domestic Private Savings Factor Markets Wages Costs & Rents Gov. Savings Taxes Intermediate Input Cost Households Government Sav./Inv.Activities Transfers Private Government Investment Product Consumption Consumption Demand Domestic Markets Sales Imports Foreign Transfers Exports Foreign Savings Rest of the World

Model AggregationDisaggregation of factors, institutions, and activitiesInstitutions (12) - Households (rural and urban, by quintile) - Government - Rest of the worldFactors of - Capital (agricultural and nonagricultural)production (5) - Labor (agricultural and nonagricultural) - Water - Summer land - Winter land

Ag GDP as % of TOTAL Page 17

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Dynamic Role of Water in Egyptian Economy GDP Change vs. HAD Releases Page 19

Unmitigated Economic Impacts 2020 - 3 years of 2.5 % loss of Total Energy 50% Hydropower Production 5% of Total 2020 - 2 years of 35% loss irrigation supply 2020 - 2 years of 1.5% GDP loss and 1 year of .5% GDP loss These type of economic variations were commonly observed pre-HAD . This same water impacts on the economy of the 2040s would be close to zero impact. Page 20

Potential Measures to Mitigate Impacts In Egypt Unilaterally Irrigation Management Improvement Alternative Crop Selection Conversion of Flood Control Storage Regional Collaboration A new Nile Basin agreement on water sharing Ethiopia refrain from Reservoir Filling during Drought years Sudan and Ethiopia reduce irrigation consumption during Drought African Regional Power Pool makes up electricity shortfall Increased and secure agricultural imports Long-term importing of low cost electricity from Ethiopia accelerates the movement away from Nile dependent economy in Egypt, reducing impacts of reduced Nile Flow. Page 21

Conclusion Long-term economic impacts of upstream Nile Development on Egypt are significant in early decades, but decreasing over time Even worst case scenarios are manageable Egypt will benefit if it receives low cost electricity produced by Nile hydropower Egypt would benefit in times of drought through a regional management of the Nile flows Many of Egypts economic impacts can be greatly reduced by regional cooperation and sharing of the benefits of Nile Development. Page 22