In the early days of President Anwar Sadat's peace initiative - euphoric times now so far past that they appear assigned a place in history - local skeptics summed up their fears by saying: "If he wins, he loses."

They thus sought to convey the idea that Sadat's real challenge was not so much making peace as making peace pay off quickly enough for the 40 million Egyptians who pin their hopes on better times.

Now his epic gamble on peace is turning into what looks like the longest of long shots and everyday life in this overpopulated country has become no less burdensome.

Just a year ago this month Sadat came close to downfall when angry crowds took to Cairo's streets for two days of rioting to protest government plans to reduce subsidies on staples.

Then Sadat acted at the prodding of the International Monetary Fund, whose stringent advice has unwittingly caused more than one Third World upheaval.

But in launching his peace offensive, Sadat chose to channel public discontent to his own tactical advantage. He insisted that Egypt's economic problems were the consequence of bearing the brunt of four wars with Israel fought over 30 years on the Arab world's behalf.

Riding that particular nationalistic tiger may prove increasingly difficult even for Sadat, whose government survives in part by exporting people from all walks of life and by cadging multibillion dollar handouts from wealthier Arab states.

"For the next 20 years the oil Arabs are going to have to support us no matter what they think of Egyptians or their leaders," a policy planner said, "because they're afraid of a radical Egypt."

Exporting people means a dearth of plumbers, electricians, doctors, mechanics, and of the intelligentsia that could help unravel the country's economic and management mess.

Without a workable plan, Egypt's economy is largely incapable of absorbing the foreign investment that could help improve the situation.

Without its better educated sons and daughters, the state simply does not have the kind of expertise it would like.

A foreign journalist long accustomed to working in Israel, for example, was taken aback when informed that no Hebrew-speaking specialist existed in the Egyptian Foreign Ministry, at least no one who could give him a rapid and reasoned reaction to a major Israeli policy pronouncement.

While Egyptian policy planners may be tempted to try to encourage splits in Israeli society to further Sadat's peace initiative, their attempts are quickly discouraged by Egypt's knowledge that it lacks the expertise.

"We know how Israelis react to war, crisis, threats, but we do not know how they will react to the challenge of peace," a high-level policy planner said. He insisted that Egypt would be ill-advised to get involved in any such campaign for fear that bumbling efforts would set off an Israeli backlash.

He pointed to Israeli Prime Minister Menachem Gebin's major exploitation in the West of Egyptian press comment that Israel insisted was proof of Egyptian anti-semitism.

That was the kind of blooper that the elite knows Egypt can ill afford in its efforts to avoid the perhaps inevitable erosion of Sadat's spectacular gesture at home and abroad.

So far, ordinary Egyptians still feel Sadat is a great man, although there is an emerging feeling he sould stop what he likes to call the "peace process" rather than undergo the undignified humiliation of haggling with Israel.

Elsewhere, such a move might well be called outright failure.

But this is a country that was persuaded by Sadat that it won a major victory over Israel in 1973 by crossing the Suez Canal.

That the Israelis recrossed the canal and were on the verge of annihilating Egypt's Third Army before the United States intervened diplomatically - is not so much denied as considered irrelevant.

More worrying is the state of the economy. The best that can be said is that it is less disastrous this year than last or the year before.

It was left to Robert McNamara, president of the World Bank, to lecture the Egyptians - ever so politely in light of the food riots caused by the bank's sister institution, the IMF - about the economy's shortcomings this week.

He eagerly accepted the perhaps optimistic official figure of 9 per cent growth in 1977, and cautiously indicated planning was improving, but he expressed worry about Egypt's 2.58 per cent annual population growth.

By the end of the century at that rate there will be at least 70 million Egyptians - 30 million more than now - and two-thirds of all investment will have to be devoted to feeding them.

McNamara did not go into the fact that the equivalent of all the acres reclaimed by the Aswan Dam project has been swallowed up by Egypt's practice of building on excellent agricultural land.

But those who have long despaired of Egypt's future should perhaps listen to the advise of an Egyptian specialized in explaining his country to foreigners "Egypt," he often says, "is a pillow."