Books: Pagodas and palm-fringed canals: 'Oleander, Jacaranda' - Penelope Lively: Viking, 14 pounds

BORN IN Cairo in 1932, Penelope Lively spent the first 12 years of her life in Egypt. Later, she drew on her early experiences in two books: Moon Tiger (winner of the Booker Prize in 1987) and Cleopatra's Sister. Oleander, Jacaranda is a lyrical account of her idyllic childhood.

Lively's father was a senior official of the National Bank of Egypt, and theirs was the privileged life of the European expatriates. They lived in a beautiful colonial-style house set in a lush garden of eucalyptus trees, lawns, pagodas and ponds. Outside, the house was surrounded by fields, palm-fringed canals, and the desert beyond. In the summer, when Cairo's heat became suffocating, they migrated to Alexandria, where 'gradations of culture and class' were indicated by the location of one's villa on the seafront and the beach one frequented.

In the background were the Egyptian fellaheen (poor peasants) and their myriad children - naked, malnourished, and often blind with trachoma. 'I knew poverty,' recalls Lively, but only from a safe distance: an invisible fence separated the Europeans from the natives, and there are hardly any Egyptian characters in this book.

An only child, little Penelope was entrusted to a nanny, Lucy, a kind, maternal woman of stern moral principles and passionate patriotism. Although Penelope's mother 'had' her for an hour a day, her parents were peripheral figures: 'My life was centred around Lucy . . . Lucy was my entire emotional life.' A snapshot of a picnic in the desert shows her sitting on a rug, cuddling up to Lucy, while her mother and a friend sit at a distance. Her devotion was rewarded by Lucy's staunch loyalty.

Often she was left to her own devices, and the garden became her universe: she befriended its small creatures - darting lizards and birds - and 'communed unquestioningly with a 30-foot eucalyptus tree'. One episode concerns the visit of a snake-charmer, brought from Cairo to rid their Eden of its serpent. He would search the garden chanting softly, 'followed by the entire household in Pied Piper fashion'. Then suddenly he would 'shoot a skinny brown arm out of the sleeve of his gelabiya up into the foliage of the pergola . . . and there would be a snake whipping and thrashing in his grasp'. They believed it was a conjuring trick.

Penelope's daily routine seems to have been punctuated with treats: walks along the Nile with Lucy, sorties to a fashionable tea-room with its array of pastries 'sumptuous and ornate as a jeweller's window', and visits to the zoo - the lion skulking in its cage, the elephant taking coins from children with its trunk and giving them to its keeper. Later, when Lucy taught her to read, she devoured books: the Bible, Plutarch's Lives, Macaulay, Dickens, Somerset Maugham and Noel Coward.

During the war, Cairo was invaded by 140,000 Allied troops, mostly British. For months the atmosphere was electric with the anticipation of Rommel's offensive. Eventually the Battle of Alamein was won. Children thrive on drama, and Lively seems to have enjoyed entertaining officers at the family home. Later she was evacuated to Palestine with Lucy and her mother, where she once caught a glimpse of General de Gaulle in his dressing-gown at their Jerusalem hotel, although no official records mention his visit at that particular time. But memory plays tricks with chronology, and Lively rightly avoids imposing an order on the 'brilliant glimpses' that flash through her mind, like kaleidoscopic slides shifting against a luminous screen. Her narrative has the authenticity of dreams, where images are superimposed on one another, and time and place alter arbitrarily.

At the end of the war, Penelope's idyllic life was shattered by her parents' divorce. Her father was posted to Khartoum and her mother stayed in Egypt 'with the man who became her second husband'. Penelope was dispatched to boarding school in England. She and Lucy boarded a troopship in the spring of 1945, with 7,000 troops and a hundred women and children: 'Everyone was heading home, except for me, who was going into exile.' In England she suffered from home-sickness and thought she 'would die of cold'. And there was the grief of losing Lucy, who went to work for another family. Lively was a stranger in her own land: 'I believe I have some idea how the refugee feels, or the immigrant.'

Forty years later Lively returned to Egypt on a package trip up the Nile. They stopped in Cairo, and she went in search of the old house. Gone were the village, the fields, the magical garden - Cairo's urban sprawl had swallowed the whole area. Miraculously, the house itself was still there, now the office of a technical college. Alexandria too 'was drowned in concrete', and the lively, cosmopolitan city of the Thirties and Forties 'survives only in my mind'.

'Oleander, Jacaranda is also a discussion of the nature of childhood perception . . . which raises the question of the nature of reality itself,' declares Lively in her introduction, but intellectual cogitations seldom interrupt the poetic flow of her narrative. Lively uses the imaginative power of a mature novelist to evoke the sounds, sights and smells of a Cairo which is not so much 'another place as another century'.

Before Lucy died in old age, Lively asked her to send back the letters she had written to her from boarding school. She did. 'They were love letters . . . and out of them there burst a raw anguish, a howl of abandonment and despair.' She had clean forgotten both writing them and her distress. She did not wish to re-read them herself, or anyone else to see them, ever. A few extracts might have enriched this already charming book, but she decided otherwise. The warm, spontaneous, generous child of Egypt had written them; the cool, reserved, English lady of letters destroyed them.