Under finance minister Dr Youssef Boutros-Ghali since 2004 the country has managed a solid recovery – expanding at a healthy 7.1% in 2006/07 compared with 6.8% the previous fiscal year and 3.5% in 2000/01.
Major reforms, built around significant tariff reductions, trade facilitation measures and customs improvements as well as a new tax code, have provided the basis for a sustainable stimulus which has translated into faster growth and more employment.
The macroeconomic picture looks remarkably solid with business and investor confidence gaining strength over the past two years. In the fiscal year 2006/07 Egypt achieved a $5.3bn balance of payments surplus, compared to $3.3bn the previous year, and this was attributed to a surplus in balance of trade dealings of $2.7bn and also an increased services surplus with tourism up 10.7% to $8bn and Suez Canal revenues up 17.2% to $4.3bn.
Improved overall confidence in the reforms was also shown by increased foreign direct investment (FDI), rising to $11.1bn in 2006/07 from $6.1bn the previous year.
Privatisations remain key to reforms and while the announcement that 45 state companies were privatised in 2006/2007 was better than previous years, Dr Boutros-Ghali’s believes a lot more need to be sold.
The new economic environment can be well demonstrated by the banking sector where new attitudes have brought bank restructurings, consolidation and new foreign investment. The number of banks has dropped from 57 in 2004 to below 39 today and the sale Bank of Alexandria to Italy’s Sanpaolo IMI in 2006 has helped spark a new vitality in the sector. In December 2007 the government announced it would sell a 67% stake in Banque du Caire, the third largest bank in Egypt.
While many challenges remain including inflation, targeted in the 6% to 8% range, and unemployment, put officially at 10%, the reform process seems to be bearing results at last, and Dr Ghali’s forecast of 7% to 9% growth until 2010 now seems both reasonable and achievable.
