Egypt’s agreement with the IMF on a $12bn, three-year loan will help finance Egypt’s import needs while cushioning the effects of the reduction in fuel subsidies and the floating of the pound, prior actions that had been demanded by the Fund. Egypt has already received the first tranche of $2.75bn after having secured $6bn in additional financing. Read more

Emad Mostaque of ReligareAfter struggling with a lack of dollars in its economy for over a year, the Egyptian central bank finally threw in the towel, moving to a liberalisation of the pound against the dollar to allow the market to set the rate and the economy to start moving again.

The initial range of devaluation is from 8.9/$ to 13/$, meaning the pound has more than halved from the level it was at during the Arab Spring. This is in line with where the black market rate has been in recent days as the economy ground to a halt, having appreciated from a rate of 18/$ over the weekend and from 15/$ last week. The uncertainty in the value of the pound over the last few weeks has caused an economy under pressure, with GDP missing its 5 per cent growth target at 3.8 per cent, to slow further, even as a series of deals were negotiated with the IMF, Gulf nations, the G7 and China for nearly $20bn in support once a series of reforms were implemented. Read more

By Max Wrey, Alaco

Since taking office in mid-2014, President Abdel Fattah el-Sisi has pursued the twin goals of maintaining social order and breathing life into the country’s sclerotic economy. He has been relatively successful with the former but has struggled with the latter. In desperate need of economic stimulus, he is now courting the International Monetary Fund (IMF), the nemesis of Egypt’s presidents-of-old. That may provide much-needed fiscal stability, but can he introduce Fund-mandated reforms without fuelling social tensions?

In the years following the 2011 Arab Spring, Egypt has found itself in real economic hot water. However, not all of the problems are of its making. Last year’s terrorist outrage in the Sinai crippled the country’s vital tourism industry. Regional trade is languishing as political instability reaches unprecedented levels. Read more

Egypt is making a big push to restore its economic relations with other African nations, in trade and investment. This follows a long period of neglect. As recently as 2015, bilateral trade with the rest of the continent made up only 3 per cent of Egypt’s total. It is now beginning to rise.

As a demonstration of Egypt’s renewed commitment to Africa, it welcomed senior political and business figures from across the continent, including 10 presidents, to the Africa 2016 Forum in Sharm-el-Sheikh on February 20 and 21. The level of participation also reflects the momentum of the pan-African drive towards regional economic integration. Read more

While the world debates climate change at the COP21 talks in Paris, it is worth having a look at how the emerging economies of Egypt and Jordan are taking a lead in stimulating private investment in renewable energy.

The EBRD has just approved a $500m envelope to support Egypt’s new solar programme, following hard on a $250m financing programme for the generation of renewable energy to be sold directly to private consumers in Morocco, Tunisia, Egypt and Jordan (supported by two multilateral climate funds, GEF and CTF). These sums will leverage much more than $1bn of parallel investment – crucially, without putting a burden on government budgets. Read more

The tragic crash of Metrojet Flight 9268 in Sinai, killing 224 people, looks increasingly to be the result of foul play by Isis. This has troubling implications for Egypt and the broader region and highlights key structural shifts in the “War on Terror”.

In a previous column for beyondbrics we highlighted our fears that Egypt was on a road disturbingly similar to that of Algeria in the 1990s, when hundreds of thousands died in a civil war. We identified the Egyptian tourism sector, which makes up over 11 per cent of GDP, as a prime target for Isis. Read more

Two years after President Mohamed Morsi’s ouster, Egypt faces a growing insurgency. The situation is eerily similar to Algeria in the 1990s, when civil war claimed over 100,000 lives. Strong steps must be taken to avert this, but we seem to be moving in the opposite direction.

Algeria was a rare socialist success in the 1980s under the single-party FLN government (Front de Libération Nationale) thanks to booming oil revenues. After oil crashed in 1986, the budget was halved and inflation soared. Youth unemployment reached 63 per cent and the urban poor protested against perceived inequality, led by Islamists who coalesced as the FIS (Front Islamique du Salut). Read more

In 1986 The Economist magazine famously created its Big Mac Index, a guide to the fair value of a currency based on the principle of purchasing-power parity, which states that exchange rates should adjust to bring prices of identical goods into line across national boundaries.

But Big Macs are not sold everywhere. Seeking a similar mechanism applicable to countries in Africa, we have created our Milk Index, based on the price of a gallon of milk. Read more

Days ahead of hosting a high-profile international investment conference, Egypt has announced it is slashing its top tax rate in an apparent bid to enhance its appeal to potential investors.

The top rate for corporates and individuals is to be reduced from 25 per cent to 22.5 per cent. But the decision also means the abolition of an additional 5 per cent “millionaire’s tax” levied on annual incomes above one million Egyptian pounds, or $133,000. That levy, introduced last year and intended as an exceptional measure for three years only, had brought the top rate to 30 per cent.

“This definitely makes Egypt more attractive to foreign investors,” said Angus Blair, president of the Signet Institute, a Cairo-based economic think tank. “I thought it was a mistake last year when the tax rate was increased. It was not the appropriate time. Egypt is now more investor-friendly than last week.” Read more

The IMF has endorsed Egypt’s economic reforms at the conclusion of an Article IV mission, giving Cairo a much-needed boost as it prepares to host a major investment conference in March aimed at attracting billions of dollars into large projects in a range of sectors.

“Policies implemented so far, along with a return of confidence, are starting to produce a turnaround in economic activity and investment,” said Chris Jarvis, who led the IMF mission. “We now project that growth will reach 3.8 per cent in [the financial year] 2014/2015.” Read more

Stability and bold new reforms after a period of political and economic turmoil will yield Egypt GDP growth of 3.5 per cent in the year to 2015 and 5 to 6 per cent thereafter, according to Renaissance Capital.

Last week, Egypt posted GDP growth of 2.2 per cent for the year to June 2014. That is inadequate for a country with high unemployment and a youthful population. But the GDP figures also hinted at substance behind the hope that has surged through Egypt since President Fattah al-Sisi came to power earlier this year: in the three months to June, GDP rose 3.7 per cent. Read more

After 100 days in power, Egypt’s president Abdel Fattah al-Sisi has been given a cautious thumbs up by economists.

Al-Sisi, a former defence minister, won a landslide victory in Egypt’s presidential race on May 24, almost a year after he led the coup that ousted Mohammed Morsi, the elected Islamist president, from power. Political turbulence has been bruising for Egypt’s economy, which by most measures is in a worse state than it was before the advent of the Arab Spring in 2011. Read more

It is not hard to find evidence of Egypt’s extensive informal economy. It is present everywhere from the rickety microbuses that are poor Egyptians’ main means of transport, to the myriad small businesses which repair, build, supply and otherwise serve the needs of this population of some 85m people.

A World Bank report on the Egyptian labour market released on Wednesday, finds that informality in employment has been deepening, meaning that the proportion of Egyptians in poor-quality jobs without written contracts or social security has been rising, even during years of higher economic growth in the past decade. Read more

By Dalibor Rohac, Cato Institute

Abdel Fattah el-Sisi’s landslide victory in the presidential race, with over 93 per cent of the popular vote, is a result not only of his undeniable popularity among some parts of the Egyptian public, but also of the repression of media and political competition that preceded the election. Following the coup in July 2013, more than 16,000 people have been imprisoned, for crimes that included criticizing the military regime on Twitter.

If el-Sisi’s victory raises doubts about the future of democracy in Egypt, it also leaves unanswered a host of pressing economic concerns. By any account, Egypt’s economy is in a worse shape than before the events of the Arab Spring. The official unemployment rate in the first quarter of 2014 was at 13.4 per cent, up by 0.2 per cent relative to the same period last year. Compared to 2010, the number of unemployed has grown from 2.4m to 3.7m. Some 26 per cent of the population is living under the official poverty line, set at around $1.50 a day. Read more

With Egypt’s presidential election approaching fast, representatives from the Egyptian government and financial community travelled to London this week to seek support from international investors for the country’s much needed reform programme.

Speaking at an Egypt day event at the London Stock Exchange on Friday, Hany Kadry, Egypt’s foreign minister, said he hoped to see “massive participation” in the presidential election on May 26 and 27 and parliamentary polls that will follow in the autumn. Read more

Young Arabs are increasingly turning their backs on cushy public sector jobs in favour of working for private companies and starting their own businesses, a survey in 16 countries has found.

There has also been an erosion in optimism that the “Arab spring” uprisings in recent years against authoritarian governments across the region will translate into better lives for ordinary people, the survey found. Read more

Source: Bloomberg

Who says military rule is bad for stock markets? The EGX30, Egypt’s main stock index, is now over 7,700 – a level not seen since mid-2008.

The index has surpassed the previous post-Lehman high before the removal of president Mubarak, which was just over 7,600 in April 2010. Read more

Cemex, the Mexican cement giant, is breathing a little sigh of relief.

It had been biting its nails ahead of a ruling from an Egyptian appeals court on whether its 1999 purchase, in a privatisation, of Assiut Cement Company (ACC), should stand. Read more

By Richard Asquith of TMF Group

It has been a difficult three years for Egypt, both politically and economically. The euphoria following the toppling of President Mubarak has given way to violent turmoil and a sharp decline in the country’s traditional economic drivers: exports, FDI and tourism. GDP growth has fallen from 7 per cent in 2009 to just over 1 per cent today and, with unemployment rising to over 13 per cent and a national debt equivalent to 89 per cent of GDP, major economic surgery is required. Read more

The Arab Spring is officially over, at least as far as Egyptian equities are concerned.

In a milestone of sorts, Egypt’s benchmark EGX30 stock index on Tuesday hit a new three-year high, surpassing for the first time its level on January 14, 2011. That was the day when a popular uprising felled Tunisian leader Zine el Abidine Ben Ali and set off frenzied speculation about which Arab leader would be next to fall.

Source: S&P Capital IQ

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