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ARTICLES

Foreign exchange reserves and floating exchange rate: first assessment, 2 years after the 2016 reform
An extremely mixed result

Two years after the liberalization of the exchange rate and the establishment of the floating of the Egyptian pound, the results are mixed. Implemented as part of an economic liberalization plan requested by the IMF in exchange for a loan of 12 billion dollars, the floating exchange rate is not unanimous among the Egyptian population . While a rise in wages followed for many Egyptians, it was not enough to soften the blow of inflation; The purchasing power of many households has declined dramatically since then, according to the Mada Masr newspaper . For example, in the summer of 2017, the Egyptian Parliament voted in favor of a 4.7% increase in the payroll of civil servants, which went from LE229 billion to LE239.5 billion. However, this substantial increase was offset by inflation of around 30% over the same period. The increase in salaries in the public sector has therefore not compensated for the general increase in prices.

The fluctuation of the Egyptian pound has had a negative effect on purchasing power, particularly due to the country’s heavy dependence on imports. The relative weakness of the Egyptian currency compared to other currencies has caused an increase in the prices of goods and services from abroad. This is for example the case of fuel, the price of which has increased significantly, from LE2.35/liter in November 2016 to LE5.5/liter in 2018, i.e. practically a doubling of the price at the pump.

Temporary measures to combat inflation

In order to limit so-called imported inflation, the government has set up a fixed exchange rate of 16LE per $1 for customs duties on goods coming from abroad . According to Al-Ahram , this measure, adopted in January 2017 and going against the floating principle, should be maintained for goods deemed essential or strategic, but disappear in 2019 for goods deemed non-essential (such as cigarettes). or alcohol). Note here that several economic actors such as Professor Rashad Abdo of Cairo University and the director of the import division of the Chamber of Commerce, Ahmed Shiha, are calling for a clear classification between essential and non-essential goods.

Forecasts for 2019/2020: budget, growth and inflation
Optimistic government forecasts

The Egyptian government forecasts growth of 6.5% in 2019 (1.2 percentage points more than in 2017), with an inflation target of 10.9% (up from previous years). ). At the end of November, he presented his budget for the 2019/2020 fiscal year, which will begin on July 1 and end on June 20 of the following year. According to The Egypt Independent , the budget responds to the five ambitions set by the government for the year 2019 , namely:

national security, particularly in the face of the terrorist threat;
improving the standard of living, particularly in the context of improved health insurance;
sustained economic growth accompanied by an increased fight against unemployment;
a strengthening of the country’s attraction for foreign investments, thanks to the improvement of infrastructure for example;
improving the efficiency of the State and its administration and reducing public spending.

Growth is also supported by a substantial and regular decline in unemployment for several years (from 12.8% in 2015 to 11.8% in 2017). However, we must remain cautious with these figures, as measuring unemployment remains a complex operation, particularly in a State where the informal economy occupies a significant part of economic activity. It must be emphasized here that growth could, in the long term, be slowed down by the fall in real wages (the rise in consumer prices exceeding that of wages, particularly since the introduction of a floating exchange rate). If this trend is not reversed in the medium term, it could have a negative effect on the level of demand and therefore on growth.

An optimistic assessment to contrast

It should also be noted that the Egyptian government’s forecasts are slightly more optimistic than those of the IMF, published at the beginning of October in its World Economic Outlook report , which forecast growth of 5.5% for 2019. According to the report , Egyptian growth is only expected to exceed 6% in 2023.

These figures remain very satisfactory for the government, since the IMF has maintained its forecasts of sustained growth in Egypt while the prospects of other states in the Middle East/North Africa zone have been revised downwards. This optimism is notably attributed to a gradual return of tourists to Egypt and an increase in natural gas production.

The regained confidence of investors would also be due to the economic reforms implemented by the government since November 2016 under the aegis of the IMF. However, the positive effect of these measures on the national economy must be qualified as shown by the effect of the floating exchange rate on real wages and measures to liberalize the economy such as the elimination of government subsidies on energy production. , which risks increasing inflation again (see above ).

2018, a prosperous year for Egyptian trade
Egypt’s foreign trade report in 2018

According to the first results, 2018 was a good year for Egyptian trade which grew, both in terms of exports and imports. According to the General Organization for Export and Import Control, affiliated with the Ministry of Economy and Foreign Trade, exports increased by 11% over the first 9 months of 2018 compared to the same period in 2017. growth in imports would have reached 14%. Note that trade has particularly increased with certain partners such as the United States (+33%), but also African countries (+21%).

Exports of agricultural products appear to have been particularly strong: they reached 4.4 million tonnes between January and November 2018, an increase of 316,652 tonnes compared to the same period the previous year. This development is good news for Egyptian agriculture which had been threatened with an embargo by many states, notably Saudi Arabia and members of the European Union at the beginning of 2018, due to the presence of high levels of pesticides in fruits and vegetables. This threat then prompted health authorities to strengthen their level of control.

Asia: a market with great potential

This trend should continue, or even increase, since Egypt has signed, according to al-Monitor , an agreement with China with a view to exporting 7 agricultural products including potatoes, pomegranates and grapes. These exports to Asian markets could maintain or even accentuate the potato crisis (see below ).

The development of foreign trade appears to be a priority project for the Egyptian government, which signed a framework document in November 2018 with a view to a free trade agreement with the Eurasian Economic Union, as highlighted by Egypt Today . The first negotiations with this organization, made up of former Soviet republics including Russia, should begin in January 2019.

A look back at the potato crisis
The roots of anger

Autumn 2018 was marked by a “potato crisis”. In September, an unprecedented rise in the price of the tuber hit Egyptian households: it reached up to LE17/kilo in certain markets, and did not subside for several weeks.

Some players in the agri-food sector, notably farmers, attribute responsibility for this crisis to the policy of market and economic liberalization since 2016, while the authorities blame the possible formation of an oligopoly. on the side of the potato supply, which could be at the origin of this inflation.

Another explanation is put forward by the Ministry of Agriculture. According to one of its officials, Abbas al-Shenawy, this inflation is due to the attempt of certain retailers to double their profits by storing their production instead of selling it in order to reduce supply in the face of constant or even increasing demand.

Many media outlets close to the government have also made public police operations aimed at seizing stocks of potatoes allegedly stored by retailers in order to increase prices.

What role does the Egyptian state play?

In order to remedy this situation, various ministries have set up low-cost sales to help Egyptian households. This is particularly the case of the Ministry of the Interior which seized at the end of October, according to the newspaper al-Ahram , no less than 700 tonnes of potatoes in Damietta to sell them for LE 6/kilo against LE 15 at the market price. at the same time.

This shortage of a basic necessity comes at a delicate time as numerous price increases are expected for the start of 2019. This is particularly the case for fuels, the price of which will impact transport costs. and could have major repercussions on the prices of most other household consumer goods.

Alexandre Vaillant

Slowing inflation and continued rise in foreign exchange reserves

The government announced GDP growth of 5.2% during the first quarter of the 2017-2018 fiscal year (compared to 3.4% in the first quarter of the previous financial year). It forecasts an increase of 5 to 5.25% over the entire 2017-2018 fiscal year.

Inflation slowed between October and November 2017 , with core inflation falling from 30.5% to 25.5%. Inflation, which the Egyptian Central Bank (ECB) and the government have failed to curb for a year ( overall inflation over one year since November 2016 is 25.9%), is the corollary of the granting of IMF loan under the “Extended Credit Facility” opened in November 2016. Conditioned on the liberalization of the exchange rate, which caused a significant depreciation of the Egyptian pound (LE), this loan included the introduction of VAT and the reduction of various consumer subsidies, considered “non-competitive practices”. A similar slowdown in inflation was observed in June 2017, before the trend reversed. Will this be sustainable? This is what the ECB wants to believe, which considers the pace sufficient to achieve its inflation objective of 13% by the end of the fiscal year in June 2018, and which has therefore decided not to change its rate. of guiding interest, set at 19.7%.

Currency liquidity has increased considerably, this objective stated when obtaining the IMF loan has thus been achieved.

Foreign exchange reserves continue their historic growth,  reaching USD 36,723 billion in November 2017 . And this, despite the repayment of around USD 2 billion in November of the loan granted by the African Export Import Bank, as well as the repayment of USD 200 million of the final tranche of the loan allocated by Turkey in 2012.

The ECB will extend significant borrowings in foreign currencies, both with States and with a consortium of international banks .

Decrease in current account deficit and increase in capital and financial account surplus

As a result of the increase in income from traditional income (tourism, Suez Canal, transfers from the diaspora) and a less and less negative trade balance, the current deficit was reduced to 1.6 billion during the first half of the new fiscal year (instead of USD 4.8 billion in the first quarter of fiscal year 2016-2017).

As a result of the increasing attractiveness of Egyptian financial securities , the capital and financial account surplus increased by USD 5.1 billion during the first quarter.

The ECB has repealed foreign currency deposit and withdrawal limits for importers of non-essential goods, a sign of increased USD liquidity within Egyptian banks.

Consolidation of debt and public spending

The government continues to reduce its debt to foreign oil companies. It has fallen to only USD 2.3 billion since June 2017. He announced the settlement of USD 750 million in arrears by the end of 2017. Full repayment of this debt is planned for June 2019.

The government has increased VAT on tobacco sales from 12.5% ​​to 21.7%, and plans to further lift fuel subsidies from summer 2018 . In addition to the savings made in public spending, the medium-term objective (5-10 years) is the definitive lifting of this type of subsidies, with the exception of certain geographical areas and the most needy social groups.

According to the Minister of Oil, Egypt should stop importing liquefied natural gas (LNG) from Algeria, Russia and France in particular by 2019, thanks to the exploitation of the Zohr gas field in the Mediterranean .

The Minister of Finance said he was aiming for a reduction in the public deficit of around 1 to 1.5% each fiscal year until reaching a deficit of 4 to 5% in 2022. This increased from 12.5 % in June 2016 to 10.9% in June 2017.

3rd payment of the IMF loan and final payment of the World Bank loan

During the third week of December, the Egyptian government received the USD 2 billion of the third installment of the loan concluded in 2016 between the Egyptian government and the IMF (USD 12 billion over three years).

On December 8, 2017, the government signed an agreement with the World Bank opening the payment of USD 1.15 billion of the final tranche of the USD 3.15 billion loan.

Aid and international cooperation

The European Bank for Reconstruction and Development (EBRD) will finance the installation of 16 solar power plants with a capacity of 750 megawatts in Upper Egypt, as part of its program dedicated to the development of renewable energies in Egypt of a amount of 500 million USD.

The European Union concluded an agreement at the end of October granting a loan of USD 705 million to finance various public projects, including the Alexandria tramway.

The British Embassy launched the “StartEgypt” fund (LE47 million), intended to support young Egyptian entrepreneurs.

Egypt and Saudi Arabia signed agreements to develop entrepreneurship and small businesses with a fund of LE 100 million on the one hand, and a fund of LE 100 million on the other hand for the acquisition of cars by drivers of VTC companies (Uber, Careem).

Kuwait has pledged to contribute USD 57 million to development projects in North Sinai , including new water supply facilities.

Fall in the trade deficit following the depreciation of the pound

According to the Minister of Commerce, Mr. Tarek Kabil, the trade deficit fell by more than 11 billion USD between September 2016 and September 2017, reaching 23.39 billion USD.

As a result of the depreciation of the LE, imports would have fallen by more than 20% during this same interval, falling to 39.8 billion USD, which strongly penalizes consumers.

The customs duty rate set monthly since the liberalization of the exchange rate was maintained in December at 16%. The World Customs Organization held its executive committee in Africa and the Middle East for the first time in Luxor. During this international conference, the Deputy Minister of Finance announced a reduction in customs duties on vehicles produced in the European Union. Egypt maintains a protectionist policy regarding imports of steel bars, with specific customs duties for China, Turkey and Ukraine.

Growth of agricultural exports and expansion of cotton cultivation

Egyptian agricultural exports increased by 11.6% during the first 10 months of 2017, reaching 4.8 million tonnes in October 2017. Foreign trade in agricultural goods is constrained by the numerous bans on importation, particularly for those transporting significant pesticide residues. Bahrain, Kuwait and the UAE have announced an upcoming lifting of restrictions, and the European Union is expected to lift restrictions on grapes.

The world’s largest cotton importer, Egypt, was expected to plant 3.74 million hectares in 2017, up from 3.11 last year. The objective stated by the government in July 2017 is to double annual production.

Transport: improving security and E-visa

Egypt has launched its E-visa system, allowing nationals of 43 countries to obtain their entry visa digitally.

The number of tourists increased by 55% in the third quarter of 2017.

The Egyptair company, in crisis since 2008 and which is preparing to renovate and significantly expand its fleet, should end 2017 with one million more passengers transported than the previous year (8 million).

The company responsible for managing Egyptian airports, the Egyptian Holding Company for Airports and Air Navigation, has concluded a cooperation agreement with the British Ministry of Transport, which should equip it with 12 explosives detection installations. This operation takes place in a context marked by increased control measures and expanded security measures since the in-flight explosion of a Russian plane departing from Sharm El-Sheikh in 2015.

The Ministry of Tourism will increase subsidies for tourist charter flights, from 2,000 to 3,000 USD per flight.

The Ministry of Transport wants to renovate the rail network which transports 300 million passengers/year. The image of the safety of this aging network has been undermined by recurring accidents for two decades, such as the collision on the road to Alexandria in August 2017. Egypt plans to acquire a thousand train sets (LE16 billion), and took out a loan with the EBRD in the amount of USD 340 million for this purpose.

Development of the pharmaceutical industry and ICT

Egypt has started production of the first “made in Egypt” smartphone, 58% of the components of which are produced locally. The factories of Sico Technology, a subsidiary of El-Siyad Salem Group, where “Sico” is produced, are based in the “technology zone” of New Assiut City (Assiut Governorate). 8 models should be developed for the Egyptian market, but also the Arab and African markets.

An Egyptian-British joint venture has been launched to produce catheters in the 6th of October city. In addition to technology transfers, this partnership with the British company Kimal will allow the Egyptian Arab Medical Equipment Company (AMECO) to export to 25 countries and integrate European markets.

The Cypriot pharmaceutical company Medochemie plans to establish a factory (for 30 million USD) in the “Suez Canal Economic Zone”.

The General Authority of the Canal Economic Zone must develop with the Emirati operator DP World a new port for the transport of hydrocarbons in Ain Sokhna.

The public agency responsible for the development of SMEs, the “SME Development Authority” (formerly Social Fund for Development) has signed an agreement with the Egyptian lessor Global Lease , whose investment in SMEs already represents 35% of the portfolio, to launch a fund of LE 20 million intended to finance around twenty SMEs for projects with a budget of between LE 50,000 and 1 million.

The real estate sector is the one experiencing the strongest growth: it has captured 18.5% of investment in the entire Egyptian economy since January 2017.

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  • Egypt is not escaping the global excitement around Bitcoin:

http://english.ahram.org.eg/NewsContent/3/12/282508/Business/Economy/Egypts-Bitcoin-scene-seemingly-growing-despite-loo.aspx

  • The “Observatory of Economic Complexity” publishes an informative overview of the Egyptian economy in the form of infographics:

https://atlas.media.mit.edu/en/profile/country/egy/

  • Publication of the “Economic Letter from Egypt” No. 78 by the economic service of the French Embassy:

https://www.tresor.economie.gouv.fr/Articles/2017/12/04/lettre-economique-d-egypte-n-78-november-2017

  • An article from “Al-monitor” on the significant drop in imports in 2017:

https://www.al-monitor.com/pulse/originals/2017/10/egypt-dropping-imports-and-deficit-in-the-trade-balance.html

 

Vincent CHAUMET

Main indicators

Increase in the cost of living since fall 2016

So-called overall inflation has increased: its increase, over one year in September 2017, is 32.9%. After a slowdown in June, inflation started to rise again in July, before flattening out since August .

In September 2017, underlying inflation (excluding energy and food) was 31.6% year-on-year, according to the Central Bank of Egypt. At the same time, the general consumer price index for basic goods (housing, running water, energy) increased by 13.6%, linked to the removal of consumer subsidies, compared to 24% for that of health care. and 42.2% for food, cultural and entertainment products. Tobacco and transport are evolving in similar proportions.

Job

For the first time since 2011, the unemployment rate fell below 12% (11.9%). The labor market remains marked by two major challenges  : the difficult integration of young people (79.6% of the unemployed population is between 15 and 29 years old) and the continued growth of the active population (29.2 million individuals ). During the first quarter of 2017, the active population increased by 33,000 people. Aware of the impact of demographic growth on the issue of employment, the authorities plan to tackle the problem head on .

Trade deficit falling

Egypt’s trade deficit over the first 8 months of 2017 fell by 37%, from 32 billion in January to 20.1 billion USD in August (or 13% of GDP). The importance of non-oil exports is increasing (+11% over this period) while imports are falling.

The government has opened an aid, support and promotion service for Egyptian exporters: the Export Services Complex .

Increase in external debt

External debt increased between July 2016 and March 2017 according to the Central Bank of Egypt, reaching USD 73.9 billion. This is due to the increase in credits granted by foreign lenders (19 billion over the same period) and the fall in the value of the Egyptian currency against the USD . According to the financial information site Al Borsa, the debt stabilized at 80 billion USD in September, increasing from 16.6% of GDP in 2016 to 33.6% for the fourth quarter of the 2016/2017 fiscal year.

Egypt joins the “club” of the five most vulnerable states facing a rise in key rates from the United States Federal Reserve, according to the Standard & Poor’s agency. The concept of the “Fragile Five” formulated by Morgan Stanley in 2013 designates the five emerging countries most dependent on foreign investors.

Increase in foreign exchange reserves

Amounting to $36.703 billion in October 2017 , foreign exchange reserves have increased since the loan taken out in November 2016 from the IMF. This exponential growth, never seen since the period 2005-2009, would be a sign of confidence from international investors .

In June, the ECB removed the cap on foreign exchange transactions, set at 100,000 USD per person since January 6, 2014 .

This summer, the ECB raised the key interest rate again to stem the high inflation since the liberalization of the LE exchange rate. The Minister of Finance announces that the rate of customs duties will remain unchanged in order to strengthen the stability of the Egyptian pound.

Increase in tax revenue

The first quarter of the 2017/2018 fiscal year recorded an increase in revenue (LE88.6 billion) compared to the previous financial year.

The 13% VAT implemented during the 2016/2017 fiscal year brought in LE28.3 billion after the first quarter, compared to LE50.7 billion the following year, thanks to a rate reassessed to 14%. This demonstrates the significant contribution of consumers to state financing. This development, in addition to being the consequence of the introduction of new fiscal instruments following the agreement with the IMF, is also due to GDP growth (at constant prices 4.2% expected in 2017 according to the World Bank). Encouraging figures for the Egyptian government, which plans to reduce the public deficit to 9.1% at the end of the current fiscal year.

Improvement in the attractiveness of Egyptian public debt

Demand for Egyptian public debt securities has increased significantly since the ECB raised the key rate (linked to the agreement with the IMF). This growing demand is driven by foreign investors .

Since the beginning of 2017, Egypt has issued Eurobonds of different long-term maturities for 7 billion USD, marking its return to this market since the last operations in 2010.

International loans

Under the agreement concluded between the Egyptian government and the IMF in November 2016, Egypt benefits from a loan of USD 12 billion over three years in return for adjusting its monetary policy and implementing reforms. structural .

At the beginning of July, the ECB received the second and final payment of 1.25 billion USD of the first tranche of the loan (4 billion USD) .

While waiting for the third payment, scheduled between December 2017 and January 2018 (around USD 2 billion), a delegation from the IMF’s Middle East and Central Asia Department prepared the second evaluation of the program at the end of October .

The Egyptian government has legislated in recent months to consolidate an attractive and reassuring business climate for foreign and domestic investors: decree implementing the investment law  ; new legislation relating to the granting of commercial and industrial licenses  ; opening of the capital of public companies to private investors  ; end of controls on financial transactions in foreign currencies at the Cairo Stock Exchange . The  “rationalization” of the granting of consumer subsidies is also expected by the IMF.

The government is expected to receive in December the third and final installment of the USD 3 billion loan contracted in August from the World Bank . In June, Egypt received the first tranche (125 million USD) of the 500 million loan intended to finance development projects in Upper Egypt.

In the context of rising external debt, Egypt completed its repayment in November of a USD 1 billion loan taken out from Turkey in 2012 . The country has also repaid 250 million USD to Libya: another payment (500 million) is planned in 2018 to close the loan of one and a half billion USD taken out under Morsi’s presidency . In addition, the ECB has planned the repayment of loans amounting to 8 billion USD for the last quarter of the 2016/2017 fiscal year, including 5.2 billion to the African Export-Import Bank.

Growth of traditional annuities

Diaspora transfers

Income from diaspora transfers has exceeded that of the Suez Canal, tourism or FDI. The liberalization of the Egyptian pound exchange regime has increased transfers through legal channels, with black market exchange rates becoming less and less attractive. Between November 2016 and August 2017, Egyptians abroad (around 9.4 million) sent 16.3 billion USD , an increase of 17% compared to the previous year.

The government plans to develop a support service to help Egyptian nationals invest in their country.

Tourism

While the country is experiencing a serious tourism crisis, revenues from services in this sector jumped by 211.8% in the first 9 months of 2017 with 5.3 billion USD (i.e. more than the 3.4 billion collected in 2016) and 5.9 million tourists traveled to Egypt during the same period, including 3.2 million European tourists. The indicator of good health for tourism remains the year 2010 with 14.7 million tourists.

Suez Canal royalties

1,528 merchant ships used the canal from January to August 2017, compared to 1,462 in 2016 during the same period. This results in an increase in revenue of 5% (470.6 million USD for 8 months).

Suez Canal Economic Zone and NEOM industrial zone projects

The government hopes to invest USD 30 billion in this 461 km2 area within five years. A joint venture between the Suez Canal Authority and Emirati port operator DP World is planned for the development of the area. Six contracts for industrial projects were signed in August. The German car manufacturer Daimler should acquire 96 km 2 in this area to set up a factory.

NEOM is a Saudi project (with an expected cost of USD 500 billion) to create an industrial and economic zone covering 26,500 km2 in the tri-border region shared between Jordan, Saudi Arabia and Egypt. on the Gulf of Aqaba. The Egyptian government has not yet commented on this.

Increase in agricultural exports

As a result of the plunge in the pound from the end of 2016 , exports of agricultural goods increased by 13.9% over the first 9 months of 2017 compared to 2016, with 4.1 million tonnes exported. The sector accounts for 10% of the country’s total exports. The agricultural trade balance remains negative, amounting to USD 42.64 billion in 2016.

The government is targeting a doubling of cotton production from 2018.

Egypt is trying to obtain the lifting of bans on the entry of its products into Saudi Arabia, the UAE or Sudan, on the grounds of the pesticide residues found.

Transport and communication

Located west of Cairo, the new Sphinx international airport is expected to open in spring 2018 to take tourists to the great Egyptian museum and the pyramids of Giza. It would have cost LE 300 million.

The government has implemented a new development strategy for Egyptair, which has lost USD 777 million since 2011. It plans to purchase 45 new planes to reach a fleet of 150 aircraft by 2025. This is the largest investment in the company’s history. For the moment, Egyptair is expected to acquire 33 new aircraft, an investment estimated at 3.4 billion USD .

While Uber will open its second largest “center of excellence” in the world in Cairo, its competitor in the region based in the UAE, Careem, has just invested in a young Egyptian startup .

The Egyptian market now has a fourth operator (in addition to Orange, Vodafone and Etisalat) which is WE, launched by Telecom Egypt .

After the sale by the government in 2016 of four 4G licenses , Egyptian operators have been offering 4G since September 2017.

Foreign investments

Increase in FDI and the attractiveness of Egypt

At the end of the 2016/2017 fiscal year, on June 30, 2017, FDI had increased by 14.5% compared to the 2015/2016 financial year, totaling USD 7.9 billion. The oil sector is the main responsible for this increase.

A UN report ranks Egypt as Africa’s fourth destination for FDI in 2016, with an increase of 16% over the year. A report from the South African investment bank Rand Merchant Bank places Egypt as the leading destination for FDI for 2018, ahead of South Africa.

Egypt will host the “Africa 2017 economic forum” next December in Sharm El-Sheikh.

At the beginning of August, the Saudi group Talaat Moustafa Group (owned by Prince Al-Waleed Bin Talal) announced an investment plan of 800 million USD in tourism infrastructure.

Development Assistance

Germany provides financial support of around USD 372 million to Egypt, particularly on the social reform front. This support is in addition to Berlin’s financing of various projects since June 2017 for USD 236 million. At the same time, the German public bank KFW, which has a strong presence in Egypt , is financing projects worth around USD 2 billion in 2017.

The British Embassy announced the investment of 97 million USD in the Benban solar park project in Upper Egypt.

A cooperation agreement was signed between the United States and the Egyptian government for the development of social and environmental projects, amounting to 121.6 million USD.

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Vincent CHAUMET

Principaux indicateurs économiques

Inflation

Le taux général d’inflation augmente de 0,4 point en avril pour atteindre 32,5 %. Sur une année, les prix des aliments et des boissons ont augmenté de 44,3 %, ceux des produits issus du blé de 76,4 %. Enfin les cigarettes coûtent 36 % plus cher.

Chômage

Le chômage continue de baisser. D’après les dernières estimations du CAPMAS (Central Agency for Public Mobilization and Statistics), 12% des Égyptiens n’avaient pas d’emploi au premier trimestre de l’année 2017, soit une baisse de 0,7 point sur un an. Le chômage reste le fléau des jeunes, en effet les 15-29 ans représentent 79% des personnes sans emploi.

Balance commerciale et réserves de devises

Depuis le flottement de la livre, le déficit commercial de l’Égypte s’est réduit tandis qu’augmentent spectaculairement ses réserves de devises étrangères : 19 milliards de dollars ont ainsi été récoltés par les banques du pays depuis le mois de novembre.

Au premier trimestre de l’année 2017, le déficit commercial du pays s’est réduit de 46 % (6,6 milliards de dollars de pertes), principalement en raison d’une importante baisse des importations, devenues très coûteuses depuis la dévaluation de la livre égyptienne.

Secteur bancaire : la BCE augmente le taux d’intérêt directeur

La Banque centrale égyptienne a décidé d’augmenter le taux d’intérêt directeur de deux points : il passe à 16,7 % pour les dépôts et à 17,7 % pour les prêts. Le secteur bancaire a collecté 1 milliard de dollars de dépôts le lendemain de cette décision. Dans le contexte économique actuel, la BCE a fait ce choix pour ralentir la création de monnaie, considérée comme l’une des causes de l’inflation. En effet, la Banque centrale prête de l’argent aux autres banques du pays et a le pouvoir de créer de la monnaie, elle joue en cela le rôle de « banque des banques ». C’est pour cette raison qu’on qualifie son taux d’intérêt de « directeur » : les autres établissements financiers nationaux doivent s’aligner sur celui-ci. En relevant les taux d’intérêts, la Banque centrale veut décourager la création de monnaie : les autres banques sont incitées à ne plus lui emprunter d’argent, car le rembourser coûte plus cher qu’auparavant. Si la Banque centrale ne prête plus, elle ne crée plus de monnaie.

L’institution relâche en parallèle les restrictions sur les transferts bancaires individuels, qui étaient jusqu’à présent plafonnés à 100 000 dollars. Cependant, la libération des affaires et de l’économie ne concerne pas tout les acteurs : les fonds de vingt-huit chefs des Frères musulmans, ainsi que de douze entreprises appartenant à la confrérie, ont été saisis par le gouvernement. Un comité spécial a été créé en 2014 avec pour objectif de geler les fonds de la confrérie, et il a récemment dressé le bilan de ses activités. Depuis trois ans, les avoirs de 1 370 personnes ont été saisis, ainsi que ceux de 1 125 entreprises et organisations non gouvernementales. Ce sont au total 34 millions de dollars qui ont été saisis.

Réformes structurelles

Le gouvernement poursuit ses efforts pour consolider les finances publiques, en accord avec les recommandations des institutions financières internationales. Il entend réduire puis supprimer les subventions dans le secteur de l’énergie (carburant, électricité) pour se concentrer sur les subventions alimentaires et les programmes sociaux Takaful et Karama (Revue de presse – Économie, avril 2017), qui verront leur part augmenter dans le budget 2017-2018. À l’heure actuelle, les subventions ajoutées aux salaires des fonctionnaires représentent 48 % du budget de l’État.

L’introduction de la taxe sur la valeur ajoutée a permis une augmentation importante des revenus fiscaux du pays : l’État a récolté 21,3 milliards de livres de janvier à avril 2017, contre 15,2 milliards l’année précédente.

Prêts internationaux 

Prêt du Fonds monétaire international

L’Égypte recevra la deuxième partie de la première tranche du prêt, soit 1,26 milliard de dollars, en juin. Le prêt total s’élève à 12 milliards de dollars et est versé en trois étapes (4 milliards de dollars à chaque fois). Cet échelonnement est un moyen de conditionner l’allocation des sommes versées à la mise en œuvre des réformes prônées par le Fonds. À ce titre, une délégation de l’institution, emmenée par Chis Jarvis, conseille le gouvernement égyptien et prend régulièrement le pouls de l’économie : elle a félicité et encouragé, lors de sa dernière visite, les efforts consentis par l’Égypte.

Banque mondiale

La Banque mondiale a attribué 200 millions de dollars au pays dans le cadre d’un nouveau programme de développement : il financera des formations qualifiantes, la rénovation et la restauration d’écoles et d’infrastructures de distribution des eaux.

Afreximbank

La Banque africaine d’import-export va prêter 300 millions de dollars à la Banque nationale d’Égypte, pour soutenir l’industrialisation et le développement des petites et moyennes entreprises égyptiennes.

Prêt du Japon pour financer la construction du « Grand Egyptian Museum »

Le président égyptien a accepté un prêt de 460 millions de dollars pour financer la construction du « Grand Egyptian Museum », situé à deux kilomètres des pyramides de Gizeh. La première phase du chantier devrait être inaugurée d’ici la fin de l’année.

Investissements 

Nouvelle loi sur l’investissement

Le parlement égyptien a adopté une nouvelle loi sur l’investissement. Elle contient un volet de mesures visant à attirer les entreprises étrangères pour s’installer dans le pays, notamment dans les régions les plus pauvres : ainsi, un rabais de 50% sur les taxes sera appliqué aux investisseurs s’installant dans des zones peu développées. Le contexte économique est favorable puisque les investissements étrangers ont bondi de 39 % sur la période de juillet à décembre 2016.

Chine

La Chine continue d’investir dans le pays et les autorités égyptiennes ne se ménagent pas pour l’encourager. La ministre de l’Investissement, Sahar Nasr, s’est rendue à Pékin pour le Belt and road forum, elle espère notamment attirer en Égypte une partie des capitaux qui financeront la nouvelle route de la soie (Silk road found). Enfin l’entreprise Dongfang a signé un partenariat avec le ministère de la production militaire dans le domaine de la production d’électricité, il est question d’un transfert de technologies.

Arabie saoudite

L’Égypte entretient des liens économiques importants avec l’Arabie saoudite dans le cadre du Saudi-Egyptian business council : la ministre égyptienne de l’Investissement en a rencontré les principaux acteurs et a déclaré qu’ils entendaient porter les investissements saoudiens en Égypte à 51 milliards de dollars dans divers secteurs (agriculture, industrie, tourisme, énergie, immobilier, Zone économique du Canal de Suez).

Canal de Suez

Les revenus du canal se redressent progressivement : ils étaient de 853,7 millions de dollars pour la période de mars à avril, soit une hausse de 4% par rapport à l’année précédente. Le directeur de l’Autorité du Canal de Suez attribue cette légère remontée à une politique de marketing flexible, concrètement des « offres promotionnelles et des bonus » offerts pour attirer et renforcer le trafic, i.e. une braderie des taxes de passage.

L’Égypte va lancer 30 projets à l’intérieur de la Zone économique du Canal de Suez, soit près de 20 milliards de dollars investis sur 23 millions de m² (6% de la superficie totale). On peut citer un complexe pétrochimique ou encore des usines de fabrication de panneaux solaires et d’éoliennes. De nombreux investisseurs étrangers ont déjà annoncé leur implantation sur le site, parmi lesquels Siemens, General electric et l’entreprise chinoise Dayun (Revue de presse – Économie des mois précédents).

Tourisme

Le bilan de l’activité pour le premier trimestre 2017 est paru et les chiffres sont encourageants : 1,7 million de touristes ont visité le pays, soit une augmentation de 51 % par rapport à l’année précédente. Ces visites ont généré 1,6 milliard de dollars de revenus. Les Allemands sont les plus nombreux, suivis par les Ukrainiens, les Saoudiens, les Chinois et enfin les Britanniques (malgré l’interdiction par leur pays des vols vers Charm el-Cheikh). Les autorités espèrent toujours se rapprocher de la fréquentation en 2010. Cette année-là, 14 millions de visiteurs s’étaient rendus en Égypte pour 11 milliards de dollars de revenus.

La compagnie allemande Lufthansa a augmenté ses vols hebdomadaires, de 29 à 33, pour suivre l’augmentation de la demande.

Par ailleurs, le gouvernement continue sa campagne de promotion à l’international. Une conférence s’est tenue en Chine le 20 mai avec comme ambition d’accueillir « un million de touristes chinois », tandis que le ministre du tourisme s’est rendu au Vatican après la visite du Pape François au Caire, pour promouvoir le tourisme religieux, qualifiant l’Égypte de « lieu du voyage de Jésus et de la Sainte famille ».

Pour les visiteurs arabes, des facilités d’obtention de visas ont été mises en place par le ministère. Cette mesure concerne les non-nationaux travaillant dans les pays du Golfe qui accompagnent les entrepreneurs arabes dans leurs voyages.

Banque Misr et Naeem Holding épinglés pour publicité mensongère

L’Autorité égyptienne de supervision financière est une institution financière chargée de réguler le marché financier non bancaire (marché de capitaux, bourse, etc.). Elle a récemment ordonné le retrait d’un panneau publicitaire « trompeur » installé pour le fonds d’investissement immobilier Naeem holdingL’affiche pouvait laisser croire que le fonds rémunérait ses clients avec des taux d’intérêts très attractifs de 26%, mais il s’agissait d’une superposition des chiffres 2 et 6.

Pierre Crésut

Main economic indicators

Inflation

The general inflation rate continues to rise, reaching 32.5% in March. It had exceeded the symbolic mark of 30% in February. This is the highest level reached since July 1986 . A year ago, general inflation was 9.2%. The Ministry of Finance has revised its forecasts downwards ( Press review – Economy, March 2017 ) and is now counting on a slowdown in price increases in December .

Rate of growth

With  3.2% growth in gross domestic product (GDP) from October to December 2016 , Egypt is performing less well than the previous year when this rate stood at 4%. The World Bank envisages the start of a recovery in 2017 , with an increase of 3.9% in GDP, driven by public investments and the increase in net exports. An improvement which should be confirmed by 2019 with a forecast of 5.4%.

Foreign currency reserves

They are at their highest in six years , with 28.5 billion dollars in March.

Trade balance

The country’s trade deficit stood at $2.3 billion in January . It is down 37% compared to last year. The increase in exports, of 27% over the same period, is driven by sales of crude oil, fertilizers and oranges. Imports decreased by 19.3%. The balance of payments recorded a significant surplus of $7 billion for the 2016-2017 fiscal year. These good results are the consequence of the choice to let the pound float. According to the Central Bank, this helped reduce the trade deficit and attract foreign capital to the country. The Egyptian government wants to continue its momentum, and the Minister of Trade and Industry announced the implementation of a plan to double the country’s exports in 2020 . The aim is to target new markets (cement, agriculture, textiles, construction materials, chemicals, engineering and electronics).

Debt

Egypt’s debt is increasing compared to December 2016 figures: an increase of 41% for external debt and 30% for internal debt.

Sotck exchange

The return of stamp duty, a form of capital tax, has been confirmed and will take effect in May. They will be divided into several taxes depending on the nature of the stock market transactions concerned. The government hopes to generate income of LE1.5 billion from it. The average yield on 3- and 9-month Egyptian treasury bills fell in March by 0.5 and 1 point respectively. The “Commercial International Bank” (CIB), one of the largest in Egypt, formalized the sale of 75% of the shares of its investment branch to a consortium of national and foreign investors, for nearly $40 million. .

The Egyptian government modernizes and strengthens its food subsidy policy

The majority of the Egyptian population is in economic difficulty, facing galloping inflation in the prices of everyday consumer goods, but also increasing prices for transport and electricity. In this context, the Egyptian government has no choice but to maintain and increase the food subsidy policy. If it does not do so, the social backlash of the reforms undertaken could hinder the expected improvement, in the medium term, of the country’s economic situation (return of investors and a favorable business climate). The total subsidy bill for the coming fiscal year (2017-2018) will therefore increase and is expected to amount to 385 billion Egyptian pounds (1% of GDP), compared to 285 billion for the current year. It includes food subsidies and the Takaful and Karama social security programs . The government will also update the information of 19 million Egyptians benefiting from a subsidy card . There are 74.5 million people who benefit from this assistance thanks to 18 million cards in a population of more than 90 million inhabitants.

Investments

What are the effects of structural reform plans on investments?

The Minister of Investment and International Cooperation, Sahar Nasr, announced at the end of March, during a meeting with the American Chamber of Commerce, her intention to reform the legal framework to facilitate foreign investments , but also to attract them to key sectors of the country’s economy, particularly those that create jobs or are dedicated to exports.

The Mada Masr newspaper returns to the plans for structural reforms and liberalization of the economy, in the mid-1990s (during a first loan from the IMF) and in 2016, with the new loan granted. Although they do indeed make it possible to attract numerous foreign investments and capital, the author regrets that these  are not accompanied by a long-term economic vision , which would encourage, for example, the transfer of technologies and job-creating sectors. .

Foreign investments

Since the floating of the Egyptian pound, $3.1 billion has been invested from abroad into Egypt’s national debt , in the form of treasury bills and bonds. The country hopes to secure another $3 billion in foreign debt financing for the coming fiscal year (2017-2018).

Saudi Arabia announced the payment of 451 million Egyptian pounds  to support Egypt’s growth and economic development. This money will finance the creation of an Egyptian company dedicated to investing in young companies, their venture capital and incubators. Economic relations between Egypt and the Saudi kingdom seem to be warming up, since the disagreements at the UN over the war in Syria, since ARAMCO recently resumed its oil deliveries which had been suspended for several months.

The Norwegian company Scatec Solar will invest $500 million to build 40 solar energy stations in Benban (Aswan governorate). The company benefits from the support of the European Bank for Reconstruction and Development for this operation. Sahar Nasr took the opportunity to announce his country’s ambition to reach the 22% share of renewable energies in the country’s total energy consumption by 2020.

International loans

The amount of foreign financing expected for the 2017-2018 fiscal year is $9 billion , according to a ministerial source. Three billion will come from debt repurchase while the remaining six billion should be allocated by international financial institutions.

Loan from the International Monetary Fund

The Egyptian parliament approved the loan from the financial institution , several months after the first tranche of the loan was awarded. The Fund continues to encourage structural reforms in the country and believes, through its President, that Egypt is on the right track.

World Bank Loans

The Egyptian President met with the president of the World Bank , as part of his tour to the United States, to discuss reforms in the country and the cooperation programs that are already at work. Negotiations are underway for the third tranche of a $3 billion loan , and focus on improving the business climate and Egypt’s ranking in the  Doing Business Report  . Also note the official launch, on March 19, of a $500 million development aid plan to create jobs and improve infrastructure in Upper Egypt.

European Union loans

The European Bank for Reconstruction and Development, the French Development Agency (AFD), the European Investment Bank and the European Union have launched a €140 million program to promote energy efficiency and renewable . Another loan of 10 million euros will be granted by the European Commission to the National Council for Women . It must finance a national plan to combat the practice of excision and for the emancipation of women in the country.

Loan from the African Development Bank

The second tranche of this $1.5 billion loan  ( Press review – Economy, January 2017 ) has been paid. Egypt has recently strengthened its position within African international financial institutions  : the country was designated vice chair of the World Bank Board of Governors for Africans.

Tertiary sector excluding tourism and Suez Canal

New legislation governing private taxi services

A bill has been validated to supervise and regulate private taxi services operating via smartphone applications . All drivers must be registered on a register and licenses will be created, which will allow taxes to be levied on this new sector of activity.

The company Uber has been condemned by the Consumer Protection Agency. The dispute arises from an advertising poster where we saw a woman, around forty years old, sitting in the back of an Uber taxi, with the following comment: “[thanks to Uber] I was saved 40 times from bringing my mother-in-law home.” The agency judged that this announcement “violated the traditions and customs of Egyptian society” and requested its withdrawal.

Remember that automobile sales are down 40% for the first half of 2017, compared to the previous year, due to the floating of the currency and the indexation of customs tariffs to the American dollar. .

Telecommunications

The historic national operator Telecom Egypt, owner of the country’s land lines, announced an 11% drop in net profits for the year 2016, which amounted to almost 2.7 billion Egyptian pounds. These poor results were not without repercussions since the company’s CEO was replaced in March. For its part, Orange has announced the upcoming entry into service of 4G for its subscribers.

Tourism

The number of tourists welcomed at the start of 2017 was 15% higher than expected , according to the ministry concerned. Good figures were recorded for the month of April in South Sinai  : Egyptians from Cairo and the delta went in large numbers to Ras El-Sadr, while some hotels in Sharm El-Sheikh reached 55% occupancy, thanks to the influx of Lebanese and Jordanian tourists. They were attracted by concerts by Assi el Hellani and Melhem Zein in the seaside resort, two singers known throughout the Arab world. In the absence of more precise figures, these optimistic announcements do not hide the persistent gloom in this sector of activity, directly affected by the attacks in the country.

Suez Canal

After reaching their lowest level in three years in February , canal revenues rose again in March and amounted to 423 billion dollars , or 7.4 billion more than in March 2016. These are in total 1 454 boats which used the navigation route. China continues to invest in Suez Canal Economic Zone. She announced the release of $71 million for a feasibility study on launching a satellite from Egypt, and the creation of a professional training center.

 Pierre Crésut

 

Principaux indicateurs économiques

Réserves de devises étrangères

Les réserves de devises étrangères continuent d’augmenter et s’élèvent à 26,5 milliards de dollars en février, soit une augmentation de 2 milliards depuis le mois de décembre. D’après la Banque centrale, les réserves sont désormais suffisantes pour couvrir six mois d’importations. Si de nombreux Égyptiens expatriés ont été encouragés à rapatrier leurs revenus suite à la dévaluation de la monnaie, c’est principalement la vente record d’euro-obligations pour un montant de 4 milliards de dollars, fin janvier, qui a permis de renforcer une nouvelle fois les réserves étrangères. Les euro-obligations sont des titres boursiers que l’acheteur est « obligé » de revendre après une certaine durée. Elles sont émises par un pays dans une monnaie différente de la monnaie nationale, ici le dollar au lieu de la livre égyptienne.

Balance commerciale

Les exportations égyptiennes ont bondi de 25% au mois de janvier, ramenant le déficit de la balance commerciale à 3,5 milliards de dollars.

Inflation et taux de change

Le taux d’inflation a de nouveau battu un record au mois de janvier, atteignant 29,3% pour le taux global et presque 31% pour l’inflation sous-jacente, soit les niveaux les plus hauts depuis la dévaluation du 3 novembre 2016. Selon le ministre des Finances l’inflation devrait ralentir au mois d’avril, prévision partagée par le FMI qui table sur une accalmie au cours de l’année 2017. Ces prévisions expliquent en partie le choix de la Banque centrale de ne pas remonter le taux d’intérêt directeur (une mesure permettant de compenser l’inflation). Elle s’est aussi justifiée en expliquant que la cause principale de cette flambée des prix était la faiblesse de la monnaie. Dans cette optique, toucher au taux d’intérêt n’aurait qu’un effet négligeable. Il est donc préférable d’attendre que la livre reprenne de la valeur, sous l’effet des réformes structurelles engagées par le gouvernement.

Le phénomène s’est vérifié fin février quand la livre égyptienne valait environ 16 dollars : à cette occasion les institutions ont fixé le dollar douanier à 15,75 LE. Cependant, la tendance ne s’est pas encore confirmée et, au 7 mars 2017, la livre est déjà remontée à 18 dollars.

Chômage

D’après le CAPMAS (Institut national égyptien des statistiques), le nombre de chômeurs a diminué de 49 000 personnes au dernier trimestre de l’année 2016. Le taux de chômage s’élève à 12,4% au cours de cette période, avec une différence très nette entre les hommes (8,9%) et les femmes (25,4%).

Retour de l’impôt sur le capital et réforme de l’impôt sur le revenu 

Le droit de timbre est un impôt sur les titres achetés et vendus en bourse, le principe étant de taxer les gains du capital qui circule sur les places financières. Il a été appliqué de mai 2013 à juin 2014 (générant 350 millions de LE de revenus) puis remplacé par une taxe de 10%, elle-même suspendue en mai 2015, sous la pression des investisseurs. Alors que cette suspension venait d’être prolongée, le gouvernement égyptien est sur le point de faire marche arrière et étudie la possibilité d’un retour des droits de timbre, jugeant que l’afflux de capitaux depuis la dévaluation lui permet désormais d’appliquer cette mesure sans crainte. Les recommandations du FMI, après l’attribution du prêt de 12 milliards de dollars, auraient joué un rôle dans ce revirement.

Le Parlement égyptien a voté une loi visant à élever le seuil d’exemption de l’impôt sur le revenu. Jusqu’ici, tous les Égyptiens gagnants moins de 13 500 LE par an ne payaient pas cet impôt : la loi propose d’élever ce niveau à un revenu de 24 000 LE par an. Le gouvernement est en théorie obligé d’appliquer les lois votées par le Parlement. Cependant, d’un point de vue pratique, il faudra attendre la confirmation de l’exécutif pour que la loi soit validée. Cette mesure pourrait s’avérer populaire et, associée au retour de la taxe sur le capital, donner le sentiment d’une plus grande justice sociale aux citoyens.

Le gouvernement parviendra-t-il à minimiser l’impact des mesures d’austérité sur les classes moyennes et pauvres de la population ?

Plusieurs mois après le lancement du programme de réformes structurelles engagé par le gouvernement, avec pour mesures emblématiques la dévaluation de la livre (3 novembre 2016), la taxe sur la valeur ajoutée et la baisse des subventions de carburant, les réactions de la société civile affluent. Elles alimentent le débat qui se limitait jusqu’alors à un dialogue entre le gouvernement égyptien et les experts du Fonds monétaire international (FMI). Le rapport de l’institution financière concernant le prêt de 12 milliards a été publié : il donne les conditions d’attribution du prêt et détaille comment l’argent devra être utilisé.

Parmi les multiples études sur le sujet, un rapport récent de l’Initiative égyptienne pour les droits individuels (IEDI) montre que la forte hausse des prix de l’électricité est ressentie en premier lieu par les personnes pauvres. L’État met en œuvre plusieurs programmes pour compenser l’effet des réformes structurelles sur une partie de la population : subventions sur les denrées alimentaires, assurance santé, et enfin deux fonds de soutien créés en 2015 (« Fonds dignité » et « Fonds solidarité »). Ces organismes ont reçu en tout 6 milliards de LE pour l’année fiscale 2016-2017 et le ministre des Finances prévoit d’étendre leur champ d’action à 1,5 million de familles dans les trois années à venir. Cependant, d’après Heba al-Leithy, professeure de statistiques à l’université du Caire et responsable au CAPMAS, ce programme est loin de couvrir la totalité des familles pauvres dont le nombre est estimé à 5 ou 6 millions.

Le congrès inaugural de la « Campagne populaire contre les politiques d’appauvrissement », mouvement aussi connu sous le nom « Nous voulons vivre », s’est tenu à la mi-janvier. Cette initiative regroupe des partis politiques, des ONG, ainsi que des organisations comme l’Union égyptienne des travailleurs pétroliers ou le Front de défense des journalistes. Ils dénoncent le prêt du FMI accordé à l’Égypte et le programme de réformes qui l’accompagne. Le groupe pointe notamment la responsabilité du gouvernement qui a fait « le choix politique » de l’appauvrissement de la population.

Investissements

Investissements étrangers

Les promesses et les réalisations d’investissements étrangers en Égypte n’ont pas manqué au début de l’année 2017. Voici un tour d’horizon des pays concernés, de l’Extrême-Orient à l’Europe.

La Chine et la Russie ont toutes deux signé des contrats pour développer des activités dans le cadre de la nouvelle Zone économique du canal de Suez (voir rubrique suivante).

L’entreprise émiratie Majid Al Futtaim a inauguré le « Mall of Egypt », situé sur Wahat road près de la ville de Six-Octobre, le 2 mars. Il représente un investissement de 6 milliards de LE.

Pour la première fois depuis trois ans, une délégation turque s’est rendue dans le pays, le dimanche 29 janvier. Composée d’entrepreneurs dans l’agroalimentaire, l’énergie et le tourisme, la délégation ne comprenait aucun membre du gouvernement turc. Les deux pays sont en froid depuis la chute de Mohammed Morsi en juillet 2013.

La chancelière allemande Angela Merkel est venue début mars pour inaugurer la première phase d’un plan de construction de centrales électriques par l’entreprise Siemens. C’est sa première visite en Égypte depuis 2007. Le contrat, signé en 2015 (8 milliards d’euros), prévoit la construction de trois centrales électriques et de douze installations éoliennes, pour arriver à une augmentation de 50% de la production d’électricité en 2018. Les centrales seront construites à Béni Suef, au lac de Burullus, et dans la nouvelle capitale administrative.

Investissements nationaux

La dévaluation de la livre ne profite pas à tous : ainsi, l’entreprise Juhayna a annoncé qu’elle réduira ses investissements en 2017 en raison de l’inflation et de la baisse du pouvoir d’achat des Égyptiens.

Un groupe de promoteurs immobiliers égyptiens a décidé la suspension d’un projet de construction (10 000 à 15 000 logements) en Arabie Saoudite, en raison des tensions entre les deux pays.

Canal de Suez

Les revenus engendrés par la voie de navigation ont atteint 395 millions de dollars en janvier, soit 40 millions de moins qu’au même mois l’année précédente.

Une délégation russe emmenée par le ministre de l’Industrie Gleb Nikitin, et comptant quelques 35 entreprises, s’est rendue en Égypte début mars. Les deux pays doivent signer en mai un contrat pour l’établissement d’une zone industrielle à Port-Saïd. De son côté l’entreprise chinoise Goodsense va investir 100 millions de dollars pour construire une usine d’aluminium dans la zone industrielle d’Ataqa (Suez), en association avec la firme égypto-saoudienne Wellbond. Une surface de 16 000 m² a été réservée. Ces deux projets s’inscrivent dans le développement de la Zone économique du canal de Suez.

Tourisme

La célèbre agence de voyage Thomas Cook a affirmé début février que les demandes de séjour touristiques en Égypte étaient en hausse, tout en réitérant les recommandations de sécurité relatives à la circulation dans le pays. La Royaume-Uni maintient le bannissement des vols charters à destination de Charm-el-Cheikh. Le sujet a été abordé lors de la visite au Caire du ministre de Affaires Étrangères britannique, Boris Johnson, mais aucune déclaration dans le sens d’un retour officiel des touristes d’outre-manche n’a été faite.

À l’occasion des vacances de la mi-année, de nombreux Égyptiens se rendent dans la station balnéaire d’Hurghada qui a enregistré une hausse des réservations. Beaucoup d’Ukrainiens ont également fait le voyage : le gouverneur a déclaré que leur nombre était en hausse de 20% par rapport au même mois de l’année précédente.

Le ministre russe des transports Maxim Solokov a déclaré qu’il donnera son accord au mois de mars pour la reprise des vols russes vers l’Égypte. Après le crash d’octobre 2015, les deux pays se sont engagés dans un partenariat visant à renforcer la sécurité des aéroports et de l’aviation civile égyptienne.

La foire « Le Marché », dont l’annulation était évoquée dans la précédente revue de presse, a finalement été reportée au mois d’avril par le ministère de l’intérieur, sans toutefois préciser de date exacte pour sa tenue.

ERRATUM – Revue économie décembre 2016

Nous avions écrit que l’État égyptien avait acheté des obligations européennes. L’article cité affirme en fait que l’Égypte est sur le point d’émettre des euro-obligations, c’est-à-dire des obligations émises dans une monnaie différente de la monnaie du pays émetteur.

Pierre Crésut

Growth and main economic indicators

Egypt recorded a gross domestic product growth rate of 3.4% for the period July-September (the indicator is measured based on an Egyptian fiscal year, it is divided into four parts from July 1 to June 30th). Over the same period, the country’s balance of payments is in surplus of 1.9 billion dollars , which is progress compared to the previous fiscal year when it was in deficit of 3.7 billion. This improvement is due to the influx of capital and foreign investments in the country, which have compensated for the deficit in the trade balance (taken into account in the overall balance of payments) which nevertheless remains worrying. The country’s budget deficit fell by one point compared to the previous year and represents 5% of GDP for the July-December period.

Devaluation of the pound and inflation

The devaluation of the pound led to a significant influx of foreign capital  : foreign currency reserves jumped by four billion dollars in November, reaching 24.2 billion in December. At this rate, the country could quickly return to the 2011 level when reserves amounted to 36 billion.

The head of the Central Bank of Egypt, Tarek Amer, welcomed the effects of this measure during an interview with Egyptian television, saying that the black market for currency exchange was on the verge of disappearing . Asked about the worrying increase in the inflation rate, he wanted to be reassuring and estimated that it would soon be under control thanks to the increase in exports and the rebalancing of the trade balance.

Current economic policy aims to discourage the use of imports, the costs of which have exploded with the devaluation of the currency and the rise in inflation: the ultimate objective is the restart of Egyptian economic activity which must, by force things, fill his new deficiencies. Tarek Amer insisted on this policy of regulation through the play of supply and demand, to the point of asserting at the beginning of December that the Central Bank would no longer intervene in the money market which must stand on its own two feet .

In light of these optimistic statements, it should be remembered that inflation, whose general rate jumped to 24.3% in December (20.2% in November 2016, 11.2% in November 2015), the main and immediate effect of impoverishing a significant section of the Egyptian population and suffocating those who are already suffering from it. Currency fluctuations and general economic developments worry Egyptians and take an important place in debates: one more indicator showing that they weigh on their everyday lives.

State policy to regulate imports

Continuing its policy of structural reforms, the State has decided to increase from 40 to 60% taxes on the importation of 320 “luxury products” , including fruits (including mango and guava), cosmetics, and electronic gadgets. This had already been done to the tune of 35% in January 2016. Countries benefiting from free trade agreements with Egypt will however not be affected by this measure (European Union, COMESA member country , Arab countries and Turkey) .

Egyptian institutions have also decided to establish a fixed exchange rate for the customs dollar, renewed every month . This aims to help Egyptian companies, which are very dependent on imports to manufacture their products, to plan their supplies. This rate will be one pound for $18.50 until the end of February.

Privatizations continue and raise questions

Egypt is continuing its policy of liberalization of certain economic sectors formerly reserved for public companies. In January 2016, private players were allowed to invest in the supply of electricity to individuals, under the supervision of the Egyptian Electricity Regulatory Authority. A law on the gas market is currently being prepared to liberalize the sector, still under the direction of a public regulatory institution . This could then extend to the education and health sectors, according to a recent administration report.

The government defends these reforms by asserting that they will be able to lower costs and improve services thanks to competition between companies. However, in an article published in Madamasr, Egyptian researchers estimate that the State, by continuing to subsidize the sector while having liberalized it, will be responsible for the margins made by the companies added to the usual surpluses in production costs. .

International loans

French bank  BNP Paribas has granted a $600 million loan to the Egyptian electricity holding company to build two power plants in Damietta and Assiut. The construction site will be carried out by General Electric and Orascom . For its part, the French Development Agency (AFD) will pay 175 million euros to the country to support the energy sector . Payment terms have not yet been specified.

Egypt also received the second tranche of a loan granted by the African Development Bank , representing $500 million of the total $1.5 billion granted in December 2015.

Foreign investments

Egyptian President Al Sissi met, Monday January 9, twenty-six regional and international investment funds, during a meeting organized by EFG-Hermes , the largest Egyptian investment fund. The fossil fuel sector (natural gas and oil) attracts a lot of capital . The objective is to increase the number of operating sites in order to reduce costs in this sector, because they weigh on the country’s economy.

The International Finance Corporation , a member of the World Bank Group , has signed an agreement with the government to invest $2 million in Flat6Labs Cairo , a start-up incubator that will support some 300 Egyptian companies over the next five years.

Suez Canal

After reaching their lowest level in twenty-one months in November , the channel’s revenues rose again in December with 414 million dollars . They nevertheless remain lower than those recorded the previous year at the same period (429 million).

The Suez Canal Economic Zone is in the process of signing a contract worth around $4 billion with an alliance of British and Spanish investors for the construction of a city specializing in medical care.

Tourism

Although it has been going through a particularly difficult period since the revolution of 2011, then the crash of a Russian plane in Sinai on October 31, 2015, the figures for tourist activity suggest an imminent resumption of growth in this sector. . The number of tourists increased by 7% in October with 506,000 people welcomed to the territory. However, we remain far from the approximately 900,000 visitors in October 2015.

The State wants to encourage recovery and has released, via the Central Bank, five billion Egyptian pounds . They will be granted in the form of loans to tourism stakeholders, to renovate and maintain infrastructure that has suffered from the fall in activity.

The seduction campaigns continue, in particular for the return of charter flights to Sinai: German flights resumed in May, more recently also Turkish and Polish flights. Since the end of December, four flights per week have linked Germany to the Sharm el Sheikh station . As for the British and the Russians, two other heavyweights in the tourist influx, statements suggest an imminent return to normal. British minister recently visited the country to check on the security situation and was rather optimistic.

However, uncertainties regarding security have not disappeared: as evidenced by the cancellation of the “Le Marché” fair , a 32-year-old event well known in Cairo, which was to take place from December 22 to 25 and welcome thousands of visitors.

A new on-demand taxi service

In response to the development of Uber and Careem as well as numerous complaints from “white” taxi drivers, an Egyptian company is launching a new on-demand taxi service: Taxi plus . Some people question the professionalism of the already existing “white taxis”, on which this company will be based. They would be too undisciplined, harsh in business, with non-compliant vehicles: in this regard the company assures that employees will undergo “physical and mental” tests before being accredited . The fact remains that the work to improve Egyptian transport is immense, so initiatives of this type are welcome, whatever one thinks of their chances of success.

Orange and Vodafone pinned for false advertising

Both operators were accused of misleading the public and spreading false information by the Egyptian Consumer Protection Agency . The operators wanted to promote the 4G network which they recently acquired ( Economy press review – November 2016 ): false advertising according to the Egyptian institution, because the new network has not yet been officially opened. The national telecommunications regulator has confirmed that 4G has not yet been launched.

PC

Bourse et finance

Dans un contexte de flottement de la livre, l’inflation sous-jacente a augmenté de deux points par rapport au mois de septembre et se chiffre à 15,75 %.

Les réserves de devises étrangères s’élevaient à 19 milliards de dollars fin octobre contre 19,6 milliards le mois précédent. Elles étaient, pour rappel, de 36 milliards avant la révolution de 2011. L’État se montre volontaire pour augmenter ses réserves et a pris diverses mesures, parmi lesquelles l’ouverture du capital de la Banque du Caire ainsi que l’achat d’obligations européennes et irlandaises.

Balance commerciale et principaux partenaires

Le déficit commercial du pays était de 37,8 milliards de dollars en août 2016, une baisse de 3,1 % par rapport au même mois l’année passée. Les exportations ont augmenté de 22,9 % sur la même période et les importations de 3,6 %. Ces chiffres montrent le dynamisme de la reprise de l’économie égyptienne en dépit des nombreuses difficultés que connaît le pays.

Toujours d’après le CAPMAS (Institut national égyptien des statistiques), la Chine était le pays qui exportait le plus vers l‘Egypte en 2015, tandis que les deux premiers pays importateurs de produits égyptiens étaient respectivement l’Inde et le Japon.

Les premiers effets du flottement de la livre

La mesure décidée par la Banque centrale égyptienne a été applaudie et soutenue par les grandes institutions financières internationales ainsi que les agences de notation. Bénéficiant de ce vent de sympathie, les banques égyptiennes ont déjà levé 3 milliards de dollars.

Le taux de change officiel a rapidement rejoint celui du marché noir : la dernière semaine de novembre, un euro s’échangeait contre presque 19 livres.

Une pénurie de médicaments à venir ?

De nombreux observateurs s’alarment de l’explosion des coûts de production des médicaments (+ 70%) dans un secteur qui importe 90% des composants nécessaires à leur fabrication : les deux tiers des usines seraient menacés de disparition. Les fabricants réclament la flexibilité des prix, qui sont actuellement invariables et fixés par le ministère de la santé, pour amortir cette augmentation des coûts de fabrication.

Prêts internationaux

Le Fonds monétaire international

Annoncé au mois d’août, le prêt de 12 milliards de dollars a finalement été accordé à l’Égypte par l’institution financière internationale. Il sera versé en plusieurs tranches, dont la première (2,75 milliards) a été reçue début novembre. Cet échelonnement permet au FMI de subordonner les prochains versements au bon avancement des réformes et de contrôler que les sommes sont utilisées selon ses recommandations. Le remboursement du prêt prendra dix ans selon les sources officielles.

Le pays s’est lancé dans un programme de réformes visant à réduire les dépenses publiques, conformément aux attentes du FMI. Les dernières mesures prises ont été le flottement de la livre et la baisse des subventions pour l’achat de carburant. Cette dernière entraîne l’augmentation du prix des services de transport en commun (Revue de presse – Ville / novembre 2016)

Sur le plan des institutions, la Banque égyptienne d’agriculture a été absorbée par la Banque centrale égyptienne afin d’améliorer les services financiers de l’État auprès des agriculteurs : à l’heure actuelle, 7 941 fermiers seraient en difficulté pour rembourser leurs emprunts.

La Banque mondiale

L’Égypte a obtenu en août un prêt de 3 milliards de dollars, le premier tiers sera versé en janvier 2017. Ce prêt vient s’ajouter à celui accordé par l’institution pour créer des emplois en Haute-Égypte, évoqué dans la précédente revue de presse.

Prêts européens

Le pays est en négociation avec plusieurs États européens pour l’obtention de prêts d’une valeur totale de 800 millions de dollars, dans le cadre d’accords bilatéraux. Ils ont pour vocation d’alléger l’impact de la crise économique et des mesures d’austérité prises par le gouvernement sur les pauvres.

Investissements étrangers

L’État a lancé au début du mois de novembre un ensemble de mesures destinées à attirer les investisseurs dans le pays, avec notamment l’exemption de taxes sur les producteurs dans certains secteurs considérés comme stratégiques. La suspension de la taxe de 10% sur les revenus du capital, décidée en juin 2014, a été prolongée pour deux années supplémentaires.

L’ambassade britannique a annoncé que le groupe British Petroleum prévoyait d’investir 13 milliards de dollars en Égypte avant 2020. Côté français, une conférence économique sur les investissements dans le pays s’est tenue le 22 novembre. Hébergée par le journal Al Ahram hebdo, elle a été l’occasion de rappeler que 130 entreprises françaises sont implantées en Égypte et qu’elles emploient 33 000 personnes.

Les partenaires européens pour le développement, regroupant le KFW group (banque allemande de développement), l’Agence française pour le développement (AFD) et la Banque européenne d’investissement, vont accorder un fond de 296 milliards de dollars pour la construction d’une ferme éolienne dans le Golfe de Suez.

Canal de Suez

L’embellie envisagée le mois précédent ne s’est pas confirmée et les revenus du canal sont en baisse de 7% en octobre par rapport à l’année précédente.

Le gouvernement égyptien a nommé en août une autorité en charge du développement d’une zone de libre échange autour du Canal de Suez. Celle-ci mesure 460 km² et a pour but de transformer l’aire du canal en un important centre industriel et commercial. Elle prévoit d’utiliser majoritairement des devises étrangères.

Le creusement du nouveau canal, projet phare du début de mandat du président Al Sissi, avait été en grande partie financé par des bons du trésor vendus aux citoyens égyptiens (les Suez canal certificates) en septembre 2014. Le ministère des finances a annoncé l’augmentation des taux d’intérêt de ces bons à 15,5 % (contre 12% précédemment), ils ne pourront être vendus que cinq ans après leur achat.

Pétrole et gaz naturel

Suspension des livraisons de l’ARAMCO

La Compagnie nationale saoudienne d’hydrocarbures (ARAMCO) a une nouvelle fois confirmé la suspension des livraisons de pétrole à Égypte pour une durée indéterminée et sans plus de précisions. L’Égypte s’est logiquement tournée vers le marché international pour suppléer ce défaut de fourniture, un contrat a notamment été signé avec l’Irak (Revue de presse – Ressources / novembre 2016).

Gaz naturel

La société British Petroleum a racheté 10% de la concession de l’italien ENI sur le gisement de Zohr découvert l’année dernière en Méditerranée.

Tourisme

La campagne de séduction à l’international se poursuit…

Le pays poursuit sa compagne de séduction à l’international, avec l’objectif de faire revenir des touristes en voie de disparition depuis la révolution de 2011 et dissuadés par les crash de deux avions, en octobre 2015 et en mai 2016. Le ministre du tourisme Yehia Rashed, en visite à Londres dans le cadre du World Trade Market, a plaidé pour le retour des vols charters britanniques à destination de Sharm el Sheikh. De son côté, l’ambassadeur égyptien à Londres a accusé les Britanniques de « boycotter » le tourisme en Égypte. Ce discours a trouvé un écho chez l’Organisation mondiale du tourisme qui a demandé officiellement aux pays concernés de retirer l’Égypte de leurs listes des destinations interdites ou formellement déconseillées. 

Taxe sur la valeur ajoutée des produits touristiques

Le pays envisage également de supprimer la taxe sur la valeur ajoutée concernant les produits égyptiens vendus aux touristes étrangers. Cette mesure, déjà en projet avant les années 2010, doit favoriser les dépenses des visiteurs ainsi que les productions nationales, notamment artisanales, qui leur sont destinés.

Secteur primaire et alimentation

Subvention des denrées par le gouvernement

Le 31 octobre, le ministre du commerce et de l’approvisionnement a déclaré que le pays disposait désormais de réserves allant de cinq à six mois pour les biens de premières nécessité (riz, sucre et blé pour l’essentiel).

D’après un rapport du CAPMAS, publié en octobre, 71 millions d’Égyptiens utilisent les cartes subventionnées de l’État pour acheter des produits de première nécessité, dans un pays qui compterait, selon la même source, 27,8 % de pauvres dans sa population. Le seuil de pauvreté est fixé à un revenu mensuel de 482 livres égyptiennes, soit environ 25 euros par mois depuis la dévaluation.

Dans ce contexte et après qu’une étude, réalisée dans le gouvernorat de Baseera, a révélé qu’une majorité de foyers considérés comme « aisés » avaient recours à ces cartes subventionnées, le gouvernement a décidé de réformer le système de prix de ces produits. Ces derniers seront taxés progressivement en fonction du salaire mensuel des citoyens propriétaires de cartes. Si ce projet s’inscrit effectivement dans le programme de réformes de l’État pour diminuer les dépenses publiques, il signale aussi la volonté de transformer les structures de l’économie du pays, laquelle repose en bonne partie sur le secteur informel : mettre en place ces prix progressifs suppose de mesurer les salaires et donc de faire passer ce secteur dans la sphère légale et quantifiable de l’économie…

Le ministère des finances a décidé de retirer la taxe sur les importations de sucre, qui s’élevait à 20% du prix de base depuis le mois de février.

L’entreprise Al Nouran va bientôt commencer la construction d’une nouvelle usine de sucre, la plus grande de la région Maghreb – Moyen Orient. La première ligne de production devrait ouvrir au printemps 2017 et couvrira l’équivalent d’un quart des importations actuelles du pays. L’objectif est d’atteindre 100% des importations une fois l’usine terminée, laquelle comptera au total quatre lignes de production.

CRÉSUT Pierre

Stock market and finance

After several months of hesitation on the policy to follow to fix the value of the Egyptian pound, while stopping the black market, the Egyptian Central Bank (البنك المركزي المصري) decided to set up a floating rate for the national currency. Despite a 13.5% devaluation in March, Egyptian institutions had not managed to stop recourse to the black market where a pound could exchange up to 10 dollars more than on the legal market. The effect of this measure was immediate and the pound was already trading, on November 6, for 15.5 dollars (compared to 8.8 a week earlier).

This decision was anticipated and was already being debated . The initiative to float the value of the currency, that is to say that its exchange rate is defined by the financial market, was taken in 2003 under Hosni Mourabak with mixed results . The online newspaper Mada Masr has published a guide summarizing the reasons and issues behind this decision by the Central Bank.

Following the announcement of a Saudi deposit of $2 billion to finance the loan from the International Monetary Fund, the Egyptian performance index (EGX30) reached its highest level in 16 months on October 13 . This figure was exceeded on November 3, following the implementation of the floating rate of the pound.

The inflation rate remains very high: core inflation (excluding volatile prices, mainly fresh food products and energy) exceeded 13% in August to reach almost 14% in September. The general rate was 14.6% in September, reaching its highest level in seven years in July .

Foreign exchange reserves and trade balance

Foreign currency reserves increased in September to $19.6 billion , $3 billion more than the previous month. The situation, however, remains very bad, considering the 36 billion in reserves that the country had before the revolution: the Central Bank of Egypt is therefore studying the possibility of selling part of the gold stocks of the Public Treasury.

Egypt’s trade deficit narrows in 2016 . Over the first nine months, imports decreased by 7 billion dollars, while exports increased by a billion. The government was instrumental in this improvement by restricting imports .

International loans

the International Monetary Fund

Faced with a serious shortage of dollars and the overall weakness of its foreign currency reserves, Egypt is seeking international sources of financing. The International Monetary Fund announced on August 11 that it was providing a $12 billion loan . In exchange, Cairo will have to engage in a reform program aimed mainly at reducing public spending, with an end to subsidies to the energy sector, and at in-depth reform of the State. The government is also committed to securing $6 billion for loan repayment through bilateral agreements.

Egypt has raised around 60% of this external financing and hopes to be able to sign the loan before the end of the year .

This borrowing sparks a debate among intellectuals and politicians, because of the reform program and its impact on the middle and poor strata of society. Important measures have already been adopted: including the historic establishment of a value added tax , as well as the reduction in electricity subsidies .

The IMF has warned that Egypt must maintain subsidies on basic foodstuffs . It is necessary to protect disadvantaged categories and ensure social peace to succeed in the country’s economic recovery. The effect of the new VAT is already being felt among the poor categories of the population in the context of inflation.

the World Bank

The World Bank announced the $500 million loan for job creation in Upper Egypt . It is carried out within the framework of an aid program estimated at 8 billion dollars that the institution will provide to the country, in order to raise the standard of living in the least developed regions.

Foreign investments

Saudi Arabia continues its investments in the country. King Salman’s official visit in April concluded with the signing of numerous economic and financial agreements , and the announcement of a free trade zone between Saudi territory and the Sinai Peninsula. At the beginning of October, the construction of a “medical city” , including a medical school and public hospitals, was launched near Alexandria at a cost of 8 billion dollars. The Suez Canal Authority also validated a contract for the construction of a steelworks in Sokhna .

The El Ahram newspaper signed a $1.25 billion contract with a Chinese company for the construction of a paper factory in the governorate of Beheira.

Secondary and tertiary sectors

Tourism

The number of tourists welcomed in Egypt fell to 2.3 million for the first half of 2016, compared to 4.8 million the previous year, a drop of 51.2% , according to figures published by CAPMAS, the September 26.

Revenues generated by the activity fell by almost 50% , from $7.4 billion in the 2014-2016 fiscal period to $3.8 billion for the 2015-2016 interval, according to the Central Bank of Egypt .

The country experienced two major air accidents, on October 31, 2015 (Metrojet Flight 9268) and May 19, 2016 (Egyptair Flight 804), which worsened the fall in the number of visitors from which the tourism sector was already suffering. Like other companies, Egyptair announced in October that it was banning “Samsung Galaxy Note 7” phones from its flights due to their risk of explosion.

Efforts to boost tourism: advertising campaign with Russians and Italians as priority targets

After the “This is Egypt” campaign launched by the Ministry of Tourism in December 2015 , the marketing agency JWT was entrusted with a new advertising campaign in August 2016, as part of a $66 million contract with the Egyptian state. This will primarily target twelve European countries . JWT was already in charge of this mission during the period 2009-2012.

Egypt plans to improve security at Cairo airport , in order to satisfy the Russian authorities and encourage the return of their tourists, in free fall since the crash of October 2015. On the side of Rome, diplomats Egyptians are working to negotiate an increase in charter flights from Italy to the seaside resort of Sharm el Sheikh .

Suez Canal

A start of improvement in activity?

After a 4.5% drop in revenue between the 2014-2015 and 2015-2016 fiscal years (respectively $5.4 and $5.1 billion in revenue) and a difficult start to the first half of 2016 ( see previous economic review ) , Suez Canal activity started to rise again in August (+$18.6 million in revenue compared to July). Maritime traffic in this area has suffered from the drop in oil prices and the slowdown in world trade, so the doubling of the canal lanes has not yet had the desired effect.

Payment of tolls in advance is under consideration

With the shortage of dollars, the authorities want to ensure and secure the inflow of foreign currencies. It is in this context that the Suez Canal Authority is negotiating, with the world’s largest shipping companies, the advance payment of tolls .

Oil import: ARAMCO suspends deliveries

Since the end of the 2000s, Egypt has imported more oil than it produces . The country signed a contract with Saudi Arabia in April 2016 : worth $23 billion, it provides for the delivery of 700,000 tonnes of hydrocarbons per month for five years. The kingdom has financially supported the country since President Sissi came to power, and must ensure revenues from its exports, undermined by the fall in oil prices since June 2014.

The Saudi kingdom, however, announced in October the interruption of oil deliveries provided for in the contract. The announcement comes in a period of political tension between the two countries , since the Egyptian vote in favor of a draft resolution on the Syrian conflict presented by Russia to the UN Security Council.

While waiting for the exploitation of the new gas reserve discovered in 2015, called “Zohr” , to improve the balance of accounts in the field of energy, Cairo continues to fall into debt with foreign oil companies: the bill amounted to $3.58 billion in September 2016.

Telephony, sale of 4G operating licenses

With the reform of the telecommunications sector, the government intends to raise state finances by providing foreign currency. Thus, the authority that owns 4G licenses in the country announced that, as part of the sale of these operating licenses, it would give priority to operators making this purchase in dollars . The sector’s historic company, Telecom Egypt, majority-owned by the state, was the first to sign a contract at the end of August with the National Telecommunications Regulatory Authority (الجهاز القومي للتنظيم الاتصلات). The other operators quickly followed suit: Orange Egypt first (licenses sold for 448 million dollars), then Vodafone (335 million) and Eitisalat (535 million).

Primary sector and food

Government food subsidy

The authorities are working to ensure reserves of crucial foodstuffs (rice, sugar, wheat). It is about facing the risks of shortages and social conflicts caused by inflation and the lack of dollars. In the Daqahlia region, the governor launched a low-cost food distribution campaign , using vehicles traveling from town to town.

The State is also studying the possibility of capping companies’ margins for the sale of certain products considered vital and priority. The application of this measure could encourage the creation of monopolies or increase the use of the black market .

Sugar crisis

Egypt consumes three million tonnes of sugar per year, produces two million and imports the rest. The increase in sugar prices on the international market (+50% in 2015), as well as the policy of restriction on dollar allocations, led by the Central Bank of Egypt, have favored the use of the black market by companies sugar importers . This ultimately led to an explosion in the price of the commodity which soared to LE9 per kg in October, compared to LE4.5 in August .

To cope with the shortage, the public authorities ( via the General Authority for the Supply of Basic Products) imported , at the beginning of September, fifty thousand tonnes of Brazilian sugar , while supplies of sugar from the company Edita ( one of the national leaders in the field of everyday consumer goods) were confiscated twice, on September 20 and 22, leading to a brief shutdown of production .

A news item emblematic of the situation: a man was released on October 16, against a bail of 1000 LE. Employed as a waiter in a café, he had been arrested a few days earlier, in the Heliopolis district, in possession of 10kg of sugar .

Wheat trade

The world’s leading importer of wheat, Egypt obtains its supplies, among others, from Russia. After rejecting a shipment of Russian wheat at the border due to the presence of the “ergot” fungus, the Egyptians in return suffered a ban on their exports to Moscow . Trade in foodstuffs between the two countries was finally restored after a month of tensions, with Egypt unable to turn to another exporter.

The government attaches particular importance to the quality of imported wheat: at the end of September it hired a Swiss company to control deliveries and plans to put an end to the use of open-air storage silos .

CRÉSUT Pierre

Stock market and finance

Pound remains stable in central bank auctions but continues decline on parallel market 

After a major devaluation of the Egyptian pound in March, the currency remained stable at 8.78 to the dollar at central bank auctions but continued its drop on the parallel market. Indeed, in spite of latest initiatives by the Egyptian Central Bank to constrict black market currency trading, the pound continued its decline and reached a record low of EGP 11.08 to US$1 on the black market in June.

The foreign currency shortage and low value of the Egyptian pound negatively affected non-oil business activity, which continued to decline in May, as companies are struggling to proceed to vital raw material imports to uphold their production.

Rating agency downgrades Egypt 

The rating agency Standard and Poors downgraded Egypt’s perspective on long-term sovereign creditfrom stable to negative in May. Indeed, because of its decreasing revenues from tourism and exports and the resulting foreign currency crisis, the agency projects that Egypt would be exposed to increasing “external and fiscal vulnerabilities” throughout the coming fiscal year. Rating agencies have repeatedly described Egypt’s unstable sociopolitical environment as an obstacle for a consolidation of foreign currency business sectors.

Egypt Air flight vanishes, causing panic on the stock market 

After the vanishing of an EgyptAir flight on its way from Paris to Cairo on May 19th, panic erupted on Egypt’s stock market, resulting in a 1.8 percent drop of the benchmark index EGX30. Investors anticipated the possibility of the incident being a terrorist attack and reacted to its potentially negative effects on the economy by selling their assets. 
A terrorist attack on a Russian plane in October 2015 resulted in a 47 percent decline of tourism, a vital source of foreign currency for Egypt.

Foreign reserves on the rise 

Egypt’s foreign reserves increased to US$ 17.52 billion at the end of May, compared to US$ 17.011 billion in April, according to a statement of the Egyptian Central Bank.

Core inflation increases 

Urban consumer price inflation surges, reaching 12.3 percent in May, up from 10.3 percent in April. The Egyptian Central Bank reacted to the rise of inflation by lifting interest rates by 100 basis points in June.

“Brexit” hits Egyptian stock market 

Global financial markets showed strong reactions after Great Britain voted to leave the European Union, leading several central banks to intervene. The British pound lost 10 percent in value against the US-dollar and reached a record low of US$ 1.32. 
Egypt has close trade relations to the United Kingdom, therefore the Egyptian benchmark index EGX30 experienced a 5.54 percent decline three days after the referendum, on June 26th.

Investment

“El-Wadi El-Gadid” agricultural project 

On May 5th, Egypt’s head of state Abdel-Fattah El-Sisi attended the celebration of the first harvest of a nationwide project of reclaiming farmland. The initiative, aiming to reclaim over 10 000 acres of farmland, comes within the context of a series of infrastructure projects, launched by the Egyptian government in an effort to increase food security and independence.

British Petroleum approved exploitation of Egyptian gas field 

The British oil company BP approved its investment in the exploitation of the Atoll gas field offshore to Egypt, 15 months after its discovery, saying it would deliver first gas by 2018.

Construction of the new metro line resumes 

The Egyptian government signed contracts for an amount of EGP 6 billion with Arab Contractors Company and Orascom Construction to resume the construction of a third Cairo Metro line, expected to be completed by 2020.

Exterior trade

Trade deficit declines 

Due to a drop in imports and a slight rise of the oil price, Egypt’s trade deficit declined by 27.2 percent in March, now amounting to EGP 19.9 billion, compared to EGP 35.7 billion a year prior. In fact, the Egyptian Central Bank aims to reduce imports by US$ 20 billion to reach a total volume of US$ 60 billion in 2016.

Egypt to receive Russian loan for nuclear power plant construction 

On May 19th, Egyptian president Abdel-Fattah El-Sisi approved a US$ 25 billion loan from Russia for the construction of the country’s first nuclear power plant. The loan will finance 85 percent of the nuclear project, expected to be completed by 2022.

Egyptian-German trade cooperation 

Germany and Egypt signed agreements worth € 153 million (approx. US$ 168 million), during a visit of the Egyptian Minister of International Cooperation, Sahar Nasr, to Germany. The agreements include investments in the sector of renewable energy and civil society projects.

Hungarian Prime Minister visited Egypt 

On the 1st of June, in the context of the visit of Hungarian Prime Minister Viktor Orban in Egypt, both countries signed an agreement concerning the financing of a major infrastructure investment. Indeed, Egypt will purchase train carriages, worth approx. US$ 1 billion from Hungary, who will finance the deal.

Suez Canal

Revenues continue to decline 

Despite the inauguration of an additional shipping lane last August, revenues from the Suez Canal declined for the third consecutive month in March. In fact, according to Ahram Online, revenues in dollars showed a 1.2 percent drop compared to the US$ 401.4 million in revenues in February. Low oil prices and the international economic slowdown are believed to be the main causes for the downturn of revenues of the Suez Canal.

Tourism

The number of tourists further dropped in April 

The number of tourists that visited Egypt in April dropped by 54 percent, compared to the prior year. In fact, in the first quarter of 2016, Egypt gained US$500 million in tourism revenue, a huge drop compared to US$ 1.5 billion at the same period in 2015. The crash of an EgyptAir flight in May is likely to further decrease the number of visitors.

Franz Paul Helms

Stock market and finance

Pound remains stable in central bank auctions but continues decline on parallel market 

After a major devaluation of the Egyptian pound in March, the currency remained stable at 8.78 to the dollar at central bank auctions but continued its drop on the parallel market. Indeed, in spite of latest initiatives by the Egyptian Central Bank to constrict black market currency trading, the pound continued its decline and reached a record low of EGP 11.08 to US$1 on the black market in June.

The foreign currency shortage and low value of the Egyptian pound negatively affected non-oil business activity, which continued to decline in May, as companies are struggling to proceed to vital raw material imports to uphold their production.

Rating agency downgrades Egypt 

The rating agency Standard and Poors downgraded Egypt’s perspective on long-term sovereign creditfrom stable to negative in May. Indeed, because of its decreasing revenues from tourism and exports and the resulting foreign currency crisis, the agency projects that Egypt would be exposed to increasing “external and fiscal vulnerabilities” throughout the coming fiscal year. Rating agencies have repeatedly described Egypt’s unstable sociopolitical environment as an obstacle for a consolidation of foreign currency business sectors.

Egypt Air flight vanishes, causing panic on the stock market 

After the vanishing of an EgyptAir flight on its way from Paris to Cairo on May 19th, panic erupted on Egypt’s stock market, resulting in a 1.8 percent drop of the benchmark index EGX30. Investors anticipated the possibility of the incident being a terrorist attack and reacted to its potentially negative effects on the economy by selling their assets. 
A terrorist attack on a Russian plane in October 2015 resulted in a 47 percent decline of tourism, a vital source of foreign currency for Egypt.

Foreign reserves on the rise 

Egypt’s foreign reserves increased to US$ 17.52 billion at the end of May, compared to US$ 17.011 billion in April, according to a statement of the Egyptian Central Bank.

Core inflation increases 

Urban consumer price inflation surges, reaching 12.3 percent in May, up from 10.3 percent in April. The Egyptian Central Bank reacted to the rise of inflation by lifting interest rates by 100 basis points in June.

“Brexit” hits Egyptian stock market 

Global financial markets showed strong reactions after Great Britain voted to leave the European Union, leading several central banks to intervene. The British pound lost 10 percent in value against the US-dollar and reached a record low of US$ 1.32. 
Egypt has close trade relations to the United Kingdom, therefore the Egyptian benchmark index EGX30 experienced a 5.54 percent decline three days after the referendum, on June 26th.

Investment

“El-Wadi El-Gadid” agricultural project 

On May 5th, Egypt’s head of state Abdel-Fattah El-Sisi attended the celebration of the first harvest of a nationwide project of reclaiming farmland. The initiative, aiming to reclaim over 10 000 acres of farmland, comes within the context of a series of infrastructure projects, launched by the Egyptian government in an effort to increase food security and independence.

British Petroleum approved exploitation of Egyptian gas field 

The British oil company BP approved its investment in the exploitation of the Atoll gas field offshore to Egypt, 15 months after its discovery, saying it would deliver first gas by 2018.

Construction of the new metro line resumes 

The Egyptian government signed contracts for an amount of EGP 6 billion with Arab Contractors Company and Orascom Construction to resume the construction of a third Cairo Metro line, expected to be completed by 2020.

Exterior trade

Trade deficit declines 

Due to a drop in imports and a slight rise of the oil price, Egypt’s trade deficit declined by 27.2 percent in March, now amounting to EGP 19.9 billion, compared to EGP 35.7 billion a year prior. In fact, the Egyptian Central Bank aims to reduce imports by US$ 20 billion to reach a total volume of US$ 60 billion in 2016.

Egypt to receive Russian loan for nuclear power plant construction 

On May 19th, Egyptian president Abdel-Fattah El-Sisi approved a US$ 25 billion loan from Russia for the construction of the country’s first nuclear power plant. The loan will finance 85 percent of the nuclear project, expected to be completed by 2022.

Egyptian-German trade cooperation 

Germany and Egypt signed agreements worth € 153 million (approx. US$ 168 million), during a visit of the Egyptian Minister of International Cooperation, Sahar Nasr, to Germany. The agreements include investments in the sector of renewable energy and civil society projects.

Hungarian Prime Minister visited Egypt 

On the 1st of June, in the context of the visit of Hungarian Prime Minister Viktor Orban in Egypt, both countries signed an agreement concerning the financing of a major infrastructure investment. Indeed, Egypt will purchase train carriages, worth approx. US$ 1 billion from Hungary, who will finance the deal.

Suez Canal

Revenues continue to decline 

Despite the inauguration of an additional shipping lane last August, revenues from the Suez Canal declined for the third consecutive month in March. In fact, according to Ahram Online, revenues in dollars showed a 1.2 percent drop compared to the US$ 401.4 million in revenues in February. Low oil prices and the international economic slowdown are believed to be the main causes for the downturn of revenues of the Suez Canal.

Tourism

The number of tourists further dropped in April 

The number of tourists that visited Egypt in April dropped by 54 percent, compared to the prior year. In fact, in the first quarter of 2016, Egypt gained US$500 million in tourism revenue, a huge drop compared to US$ 1.5 billion at the same period in 2015. The crash of an EgyptAir flight in May is likely to further decrease the number of visitors.

Franz Paul Helms

The pound

As the Egyptian pound reached a record low of US1$ equaling 10 LE on the black market in March, the Central Bank of Egypt announced that it would pursue a more flexible exchange rate policy. In fact, on the 14th of April, the CBE admitted a major devaluation of the pound to 8.85 EGP per dollar from its previous level of 7.73 EGP. It is the first devaluation since Central Bank governor Tarek Amer took up office in November 2015. The policy-shift is intended to respond more effectively to market imbalances. 
Indeed, shortly after the move, the CBE was able to record a sale of US$500 million in treasury bills and bonds. However, experts warn that a further devaluation of the pound will lead to a significant increase of inflation. With several million Egyptians reliant on subsidized food supplies, a boost of consumer prices could have devastating consequences. The CBE stabilised the pound at the end of the month at 8.78 EGP.

Furthermore, to address the problem of informal speculation on the parallel market, Supply Minister Khale Hanafi announced on March 21th that the government would introduce a “unified exchange rate”, which is to be fixed in cooperation with money changing companies. However, Egypt Independent reports that, despite the agreement, Egypt’s General Prosecution is investigating several exchange bureaus for hoarding dollars.

Basic goods

Egypt Independent reports that the foreign currency shortfall is leading to major shortages in pharmaceutical products. In fact, as the sector is heavily reliant on imports, companies struggle to proceed to vital raw-material purchases in foreign markets. Therefore and because the government imposed restrictions on retail prices, several companies consider halting their production.
The Egyptian government decided to ban the trading of imported wheat inside the country. Egypt, which is the largest wheat importer in the world, has fixed a local procurement price above global prices in order to encourage domestic wheat production. However, this margin has been subject to wide scale fraud as smugglers continued to resell cheap imported wheat on the domestic market.
Also, the government will reduce its fuel subsidies to lower its budget deficit. The cut will be amortised by the falling oil price, according to the Egyptian Finance Ministry.

Investment

Orascom Telecom, the company of the Egyptian businessman Naguid Sawiris, offered a tender for the acquisition of CI Capital, a branch of Egypt’s largest commercial bank, Commercial International Bank (CIB). However, several banks, supposed to finance the acquisition, withdrew from the project. Later, the National Bank of Egypt offered a bid for the acquisition itself, competing with the offer from Telecom. Sawiris accuses the Central Bank of Egypt of stalling the acquisition and disrupting competition by the use of public funds.

In a move to make Egypt more attractive to foreign investment and to stabilize the stock market, the CBE will acquire stakes in two major investment banks. Indeed, the Central Bank will purchase stocks to a 40% stake of the Arab African International Bank (AAIB) and to a 20% stake of Banque du Caire on the Egyptian stock market by the end of this year.

Saudi-Egyptian Business Relations

On the 7th April, Saudi Arabia’s King Salman arrived in Cairo for an exceptional five-day visit in Egypt. According to a press release of the International Cooperation Minister Sahar Nasr, both countries signed agreements accounting to US$25 billion during Salman’s stay in Egypt. Furthermore, they agreed on the creation of a 60 billion riyals (approx. US$16 billion) investment fund, infrastructure investments and the creation of an economic free zone in Sinai.
The highlight of the visit was the announcement of the construction of a bridge across the Red Sea, connecting Egypt and Saudi Arabia with a motorway. The bridge, which will be named after the Saudi King Salman, is intended to foster trade relations between the two countries. 
The Egyptian presidency further announced that Egypt would return the islands of Sanafir and Teeran in the Red Sea to Saudi Arabia.

Ahead of the visit, the Saudi company Saudi Aramco concluded a US$23 billion deal with the Egyptian General Petroleum Corp over the provision of petroleum products to Egypt within the coming five years.

Together with the investments announced during King Salman’s visit, business relations between Saudi Arabia and Egypt brought up projects worth approximately US$45.65 billion in April alone. According to experts, the agreements are believed to be part of a new policy regarding Saudi financial aid to Egypt, focusing on loans instead of interest-free financial support.

Tourism

Egypt’s tourism industry continues to suffer from the repercussions of the attack on a Russian plane in October 2015. Indeed, the number of tourists has declined by 45.9 % in February compared to 2014. The hotel occupancy in the Sinai region ranged from 2% to 17% in March.

F.P. Helms