Egypt has received $40 billion investments and transfers from abroad since its currency was floated late last year, after receiving the largest International Monetary Fund loan in the Middle East region.
According to its Central Bank Governor, Rami Aboul Naga, “the funds include receipts from exports, investors selling dollars to buy Egyptian assets, and the exchange of dollars for Egyptian pounds, either on the local market or through remittances”.
In 2016, the International Monetary Fund had approved a $12-billion loan program for Egypt to restore investor confidence and help recover an economy battered by years of political uproar, making it the Middle East country to receive the largest International Monetary Fund loan on record.
The International Monetary Fund had approved loan to the country after Egypt floated its currency to end a crippling currency crisis and raised the price of subsidized fuel to reign in one of the region’s largest budget deficits in November, 2016.
In exchange for a $12 billion loan from the International Monetary Fund (IMF), Cairo took several steps to fulfill a broad set of objectives, including attracting foreign currency to its banking system, curbing the budget deficit, and increasing foreign direct investments in the country.
According to a data from National Bank of Egypt, in the last year, after the central bank removed all restrictions on the exchange rate, and raised interest rates by three percentage points so the banking system could absorb liquidity from the currency black market the Egyptian stocks gained 25 percent since then, with the pound weakening by about 45%.
Inflation has surged to above 33 percent in July due to the weaker currency, higher taxes and the subsidy cuts. According to Egypt’s official statistics agency, the Egyptian poverty line stands at an income of LE5,787.9 annually and LE482 monthly, 48 per cent higher than in 2012/2013 having about half of Egypt’s 93 million people living below or near the poverty line.
However, things look promising as stocks have surged nearly 60 percent in local currency terms, and the government expects foreign direct investments to exceed $10 billion this fiscal year.