Cairo – Mubasher: Egypt’s International Monetary Fund-backed economic reforms, including the currency float in November 2016 and cutting fuel subsidies, have started to pay off, businesspeople and analysts told the Financial Times (FT).
They expected Egypt’s foreign investments to grow as economic indicators of the North African nation have improved, attracting overseas investors back to the country.
Egypt's budget deficit is projected to slash to 8.4% of gross domestic product (GDP) in fiscal year 2018/2019, from 9.8% in the current fiscal year. The Arab nation’s fiscal year begins on 1 July.
It’s worth noting that Egypt’s supergiant offshore Zohr gasfield in the Mediterranean, along with other finds and government investment in infrastructure have eliminated power shortages that undermined the industrial sector over the last several years.
Moreover, the Arab world's most populous country plans to float stakes in state-owned firms on the Egyptian Stock Exchange (EGX) this year as part of the government's initial public offering (IPO) programme.
Foreign investors are waiting to see if the economic reforms are “sustainable and politically viable,” head of the American Chamber of Commerce in Egypt, Tarek Tawfik, told the FT. “US multinationals are gearing up to expand their investments after they ensure that reforms will continue,” he added.
Bankers revealed that international investors are further focusing on the healthcare, consumer goods, textiles and manufacturing sectors on the back of their solid domestic market of about 98 million people, in addition to export opportunities after the local currency's devaluation, according to the FT.
For his part, Mohamed Abu Basha, head of macroeconomic analysis at EFG Hermes, said that investors see “reform fatigue” as a risk. He cited that “there is no reason for such worries because reforms that are coming are of less magnitude than the ones already implemented.”
High inflation, which took its toll on demand since the flotation, has recently started to ease, he said.
“It takes time for demand to recover after macro adjustments like the one Egypt went through, so it is natural we are not seeing a lot of [foreign direct investment (FDI)] now,” he says, adding that Egypt's FDI will see "a pick-up" as of next year as demand rebounds.
