Capital is coming, says Egypt's finance minister El Garhy
Egypt's finance minister Amr El Garhy tells Emerging Markets the country is on the verge of unlocking access to not only an $12bn Extended Fund Facility, but also some $10bn–$15bn of foreign direct investment
Egypt’s ailing economy is on the cusp of a $12bn IMF programme that could help mobilise $10bn-$15bn of much needed foreign investment into the country, the country’s finance minister, Amr El Garhy, told Emerging Markets on Thursday.
El Garhy, a former investment banker who took office in May this year, is the eighth person to take up the role since the Egyptian revolution in January 2011. He has inherited an unstable regime facing enormous challenges, and diabolical metrics. Egypt has crippling twin deficits and indebtedness has risen to close to 100% of GDP. Low growth of 1.5%-2% and rapid inflation have done little to improve the situation.
But Egypt is on the verge of an agreement with the IMF which would unlock access to not only a $12bn Extended Fund Facility, but also some $10bn–$15bn of foreign direct investment, not including investment from the oil and gas sector. While El Garhy expects this over a period of two to three years he acknowledges that an IMF agreement will not provide instant access to fast cash, nor a solution to all Egypt’s problems, though he does see it as an important endorsement of the health of the economy. “These things take time,” he said, noting the importance of fiscal and structural reform.
Egypt is also at the “advanced stages” of Eurobond issuance and is planning to be out with a new deal of $2.5bn-$3bn before the end of the month. El Garhy is conscious to avoid a clash with the US elections though is seemly ambivalent about the result. “I’m open to dealing with any regime, we’ve had good relations with the US,” he said.
“We’re a very diversified economy and our potential is huge,” he said. “But our challenges are enormous. In recent years government spending has been very rigid.”
Fiscal reform is coming in the form of a five year plan to gradually increase VAT, reducing wages which currently make up 28% of the budget. While subsidy cuts are on the agenda, El Garhy wants to make sure they are made in the right places and will retain food subsidies for the poor.
Regardless, El Garhy has work to do to convince those foreign businesses deterred by what they see as elevated security risks.