Egypt’s economic situation has undergone a remarkable recovery since it began to falter earlier this decade. In 2016, the country obtained a $12 billion IMF loan in exchange for implementing a rigorous reform program that included tough measures such as currency devaluation, reforming public enterprises and overhauling monetary policy. While the measures were temporarily painful, the long-term benefits are becoming clear, with Egypt now posting high GDP growth and other positive economic indicators. Dr. Mohamed Maait has been working at the Egyptian Ministry of Finance continuously since 2015 and was appointed minister in 2018. In 2019, he was named best African finance minister for his role in driving Egypt’s ambitious program of economic reform.
The IMF has recently praised Egypt’s “remarkable macroeconomic improvement” since the economic reform program began in 2016. How would you describe the economic turnaround?
Four or five years ago, the economy was in a position in which it wasn’t able to perform in terms of economic growth, currency reserves, creating jobs or providing basic services to citizens. The trade deficit was high. Egypt is a big country with a big population and big needs to be met. At that time, the country was also negatively influenced by the deteriorating situations in countries like Syria, Iraq and Yemen. Egypt is not isolated, and the problems around us affect our security and the future of the region. These issues required increased spending on things like security and borders, and also impacted our trade and investment. That was the direction of the region, and Egypt was struggling at that time. What we’ve done over the last four years to achieve economic recovery hasn’t been easy. But we needed to do something to cut our losses and avoid a collapse. So we undertook an intense economic reform program that involved tough decisions from the political leaders and for the people of Egypt to accept them. It was a difficult road, but now we’re beginning to see these tough decisions paying off.
Could you describe how the economy has changed in real terms over the last four years?
Look at the Egyptian pound, which has been appreciating for the last five months. You can also look at the level of GDP growth. In 2014, growth was around 2.9%, but we are targeting to reach 5.6% in July. Look at unemployment. It was at 13.3%, and now we are looking at around 9%. Look at the primary deficit. It’s been in the negatives for the last 15-20 years, and now we’re targeting a 2% surplus. Look at the overall deficit, which was close to 17% some four years ago. In July, we are expecting it to come down to 8.3%. Look at the currency reserve, which was below $15 billion. Now, we have close to $45 billion. Before, with a lack of currency, imports like fuel, food and medication were all challenges for people and they would sometimes even have to queue for hours to get something like petrol. Look at inflation. In 2016, it hit above 30%, now it sits at around 12.5%, and we are targeting to get it around 10% next year. Our debt-to-GDP ratio was close to 110% in 2017, but we have brought it down to 93% or even less. Targeting debt is a priority, and by 2020 we hope to have it at a maximum of 89%. The Egyptian people are also another key indicator. Yes, there is still an imbalance between income and the cost of goods, but many people who were living in slums or inadequate housing before now have far more social housing than ever before. Electricity used to be cut up to 12 hours per day. That meant no air conditioning and no elevators. Now we have an electricity surplus. In 2011, we moved from being an exporter to an importer of natural gas, and, as a consequence, we suffered shortages. That meant manufacturers couldn’t trust the natural gas supply and had to reduce their activities. But as of last September, we started exporting natural gas because we started to work with international companies in exploration and other projects. We also paid back almost 90% of the arrears accumulated to energy companies, which renewed their trust in the Egyptian economy and increased the field development rate.
In terms of the roads, we have built more than 7,000km of new high-quality roads. We also just built the world’s widest suspension bridge. All the big rating agencies like S&P and Fitch have upgraded Egypt. If you take these as indicators for the perceptions of Egypt, I see progress. If we can continue like this until 2030, Egypt will be one of the top economies. You can see that in just a few years, we’ve been able to accomplish something that seems unbelievable. Four years ago, we were in a disaster situation. Now, we are making headlines because of what we’ve done. Of course, we still have a lot of work to do. The most important of them is human capital development – improving education, healthcare and reducing poverty. But we need money for all that so we have to grow. We have to create jobs and opportunities. We must continue with economic reform. After reforming our monetary policy, we have to concentrate on structural reform. We have to thank God, the political leadership and the people. If people didn’t accept these hard choices, we wouldn’t be where we are today. But the time has come to say that the quality of life is improving and Egypt can look to the future with optimism. We’ve sorted out all the biggest problems.
To what extent do you see the perception of foreign investors shifting?
Foreign partners have also been very important in our journey to economic recovery. The IMF program that began in 2016 was key, as were other development partners who supported us. Germany stood firmly beside us as well and provided us with loans worth over $250 million. Big German companies like Siemens also came and worked with us during this difficult time. All of this support helped. We didn’t act alone, but with these partners who trusted us. We understand that the future of this country is a real economy, and the private sector will be the main driver of the economy. We also understand that first, we have to convince foreign investors that the situation has improved. We still have homework to do. We have to continue to modernize our institutions, our customs authority, our industrial land program and reduce bureaucracy. We have to also ensure our roads are good and our laws are organized. We have to improve the business environment in order to attract more FDI. But as people trust us more and more, they will come. After what we’ve done over the last years, we can already see that more and more FDI is coming. It is still not at the level it could be, but in order to get more, we are continuing to improve the investment environment. We have a prime minister who is working towards that because he knows that FDI is the future of the country.
How would you define Egypt’s competitive advantages as an investment destination today?
Egypt can be viewed as a country of prosperity in a very strategic region. We are at the intersection of Africa, Europe and Asia. We have more than 100 million Egyptians, who are clever and well trained. Egypt is targeting GDP growth of 6% for the 2019-2020 fiscal year, and 7% beyond that. Look at all we have done and what’s yet to come. We are building 14 new cities at the same time. Two weeks ago, we inaugurated a fantastic new city. It has 55,000 apartments that are looking at the Suez Canal, and all the urban services required so people are beginning to move there. We are building 13 more like that including a new capital. Look at Egypt as a country of new opportunities. We have so much potential, and we are moving to a situation where unemployment is around 9%, inflation is at below 9% and GDP is growing by 7%. Egypt is growing in terms of population as well, and has one of the highest fertility rates in the world – more than 2.7%. We have one million graduates entering the labor market every year from universities and colleges. We have stability, as well. Egypt also has many agreements with different countries, and the Africa-wide free trade zone agreement that is in the pipeline would further enhance Egypt’s status as a gateway to the African market. We have the Suez Canal Economic Zone, which is exempt from everything – taxes, customs, duties, property taxes and so on. Investors can use that area to grow into new markets in Africa, Europe or the Middle East. We are improving the business environment and have shown that our economy is resilient. The IMF and JP Morgan recently said that the Egyptian economy is more resilient than ever. I hope that all of this will encourage investors to partner with us for the future of Egypt.