Egypt’s economy has suffered. Terrorism, fiscal mismanagement and political instability have taken their toll.
But it’s debt fuelled
Whilst some growth was driven by a sharp increase of foreign direct investment, much of it came from debt.
Egypt has been to the markets, raising $20bn since March 2016. The country has also received an IMF loan, in return for austerity measures and tax increases.
And this is a good thing
On the back of these IMF induced reforms, market confidence is surging.
Egypt’s real estate, energy and financial sectors are once again drawing in international investment. This has been enhanced by a new contracts law, which gives investors the legal certainty they need to do business.
The retaining of high interest rates by Egypt’s central bank is another boon for investors: it promises higher returns, demonstrates the authority’s will to keep inflation in check, and shows confidence in the economy.
The development and privatisation of natural gas has ensured Egypt’s future energy needs, whilst also providing an export opportunity.
Also, with dollar reserves up, Egypt is able to import much needed goods.
And although Egyptian consumers are yet to see the fruits of the recovery, the government needs to stick to its fiscal discipline and continue to decrease its structural deficit. This will keep its creditors and investors happy.