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Winners and Losers since the flotation: what is next? - Daily News Egypt

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Winners and Losers since the flotation: what is next?

Next Friday, 3 November, marks a year since Egypt has started its economic reform programme—one that has been the most difficult—to revive the ailing economy and achieve growth rates that reflect on creating jobs, curb unem- ployment, and improve standards of living for Egyptians. At the heart of these bold and cru- el reforms came …


Next Friday, 3 November, marks a year since Egypt has started its economic reform programme—one that has been the most difficult—to revive the ailing economy and achieve growth rates that reflect on creating jobs, curb unem- ployment, and improve standards of living for Egyptians.

At the heart of these bold and cru- el reforms came the flotation of the national currency on 3 November 2016. This step unlocked the long-sought funding from the International Monetary Fund (IMF).

Daily News Egypt has kept an eye on the impact of the flotation and the recent reforms that they had on the indicators of the Egyptian economy’s performance.

The truth is the economic recovery

circle is expanding and is active, but only in financial indicators. It is grow- ing slowly in the indicators of the real economy, such as industry, investment, export, and production, which have the real impact on the population, through creating jobs, reducing prices, and improving standards of living.

 

Development of Foreign Exchange Reserves During Flotation Year 2016/2017

Foreign exchange reserve, which achieved great leaps but was burdened with debts.

Egypt has succeeded in increas- ing the foreign exchange reserves, bringing them up to unprecedented levels amounting to $36. 5bn by the

end of September, thanks to the flotation of the pound in November 2016.

The rise in foreign exchange re- serves would improve Egypt’s credit rating, enabling it to meet its obliga- tions in time and reduce the cost

of borrowing from international markets.

But the problem here is that a preponderance of reserves consists of short-term debt that came from foreigners’ participation in government debt instruments.

 

Evolution of economic growth during the flotation year 2016/2017

Economic growth embarks on weak recovery

Economic growth is on the rise,scoring 5% by the end of the first quarter (Q1) of the past fiscal year, after a year since the flotation, especially as tourism, exports, and invest- ments move up.

 

Evolution of net FDI in flotation year 2016/2017

Foreign Direct Investment: improve- ment that does not match reform

Why isn’t Egypt attracting investments? Does weak FDI reflect investors’ view of Egypt?

While foreign direct investment is improving, it has fallen short of the target. The increase is still as low as $1bn in the last fiscal year that ended in June 2017.

Evolution of Net FDI since 2012

Evolution of unemployment in 2016/2017

Evolution of trade balance in 2016/2017

Did the industry benefit from the flotation? Why haven’t imports declined and exports risen at significant rates?

Despite the slight improvement in exports and the limited decline in im- ports, the estimations of investment

banks and economists suggest that the trade balance will show better improvement in the current fiscal year.

 

Trade balance in 2016/2017 compared to 2015/2016

Evolution of external debt in 2016/2017

Evolution of external debt since 2010

Evolution of inflation since November 2016

 

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