Egypt banks on investment summit to boost finances
After four years of political turmoil, Egypt is staking its economic revival on an investment summit in Sharm al-Sheikh
After four years of political turmoil, Egypt is staking its economic revival on an investment summit in the Red Sea resort of Sharm al-Sheikh this weekend.
The government has won praise from investors for making initial economic reforms and setting clear targets for further changes, but the jury is still out on whether Egypt can meet its lofty promises.
Here is a look at how the economy's key indicators have changed since the fall of autocrat Hosni Mubarak in 2011 and what the government expects to achieve in the coming years.
Egypt’s gross domestic product (GDP) grew at four to seven percent before the Arab Spring, but slowed to below two percent in 2011. Growth recovered to 5.6 percent in the last six months of 2014, a step towards plans for economic expansion to average seven percent by the end of fiscal year 2018/19.
Foreign direct investment
Egypt hopes to attract investments worth $60 billion over the next four years. Africa’s third largest economy saw inflows of around $8 billion before the 2011 uprising shrivel to half that in recent years as political upheaval kept most foreign companies on the sidelines.
Egypt’s budget, long strained by costly energy subsidies and bloated public sector payrolls, ballooned to 14 percent of GDP last year. The government hopes to get that down to 10 percent next year and 8.5 percent by fiscal year 2018/19.
The central bank surprised analysts with a 50 basis point cut to the two benchmark rates in January, bringing the overnight deposit rate to 8.75 percent and the overnight lending rate to 9.75 percent. The bank raised the rates by 100 basis points in July in an attempt to hold down inflation following an initial round of cuts to fuel subsidies.
The dollar has been selling at a cut-off price of 7.5301 pounds for more than a month in the central bank sales that give the bank effective control over official exchange rates. Earlier in the year, the bank let the pound weaken in an effort to wipe out black market trading. It has also widened the band around the official rate at which banks can trade dollars and imposed a
limit on dollar deposits in banks, which traders say has dramatically reduced black market activity.
Egypt’s currency reserves plummeted in the months after the 2011 uprising from $36 billion to critically low levels below the $15 billion needed to cover three months of imports for the most populous Arab country. Reserves have stabilized above $15 billion for the past 18 months. But a boost in tourism and foreign investment is needed to return reserves to earlier
Joblessness is a chronic problem in Egypt. The official unemployment rate is about 13 percent, but the real figure is thought to be much higher. The government is aiming to get the rate below 10 percent over the coming four years.